Chapter 1, 2 - Professionalism & Stakeholders Flashcards
Professional role of an actuary to stakeholders:
Actuaries help stakeholders to - IDENTIFY - ANALYSE - MANAGE - and MITIGATE the FINANCIAL RISKS they face.
What are actuaries’ main jobs in the financial industry?
- assess,
- quantify,
- manage,
- monitor,
the risks inherent in:
- financial structures,
- products,
- schemes,
- contracts,
- transactions that provide benefits on future financial events.
Skills necessary to perform the actuarial role (ACC):
DEVELOP THE SOLUTION
- PROJECT and discount future cashflows using assumptions
- Use ECONOMIC ANALYSES to form judgements about future inflation and interest rates
- handle ASSUMPTIONS in a critical manner,
- build appropriate MARGINS into assumptions and appreciate the impact of such margins,
- Build, parameterise, test and implement MODELS,
- Use data relating to future LIABILITIES to estimate payments that need to be met
- handle DATA in a critical manner.
MONITOR THE EXPERIENCE
- manage the ACCUMULATION of assets to meet future liabilities.
- monitor the progress of the ACCUMULATION of a fund,
- manage the VARIANCE in the progress of a fund to ensure that future liabilities are met
- calculate the CONTRIBUTIONS required to build up a fund over time to meet future liabilities,
- analyse the variation between the actual and expected EXPERIENCE,
- advise on REINSURANCE and other risk transfer mechanisms,
- contribute to decisions on INVESTMENT POLICIES aimed at meeting future liabilities.
Roles of actuaries as professionals in the workplace & with govt.
- participate with govt. in SHAPING LEGISLATION that affects financial structures, products, schemes, contract and transactions that provide benefits on future financial events;
- understand when & where the expertise of other professionals is needed and work with them to SOLVE PROBLEMS,
FUZZY STUFF:
- operate within an environment that requires professionalism, scrutiny & transparency in the disclosure of information,
- apply the highest standards of independence and due diligence to protect the public interest. There should be no conflict of interest for an actuary in working for a client and at the same time serving the public interest.
- communicate the results of all his/her work.
Statutory roles of actuaries
Mainly relate to the certification of the adequacy of the valuation of assets and liabilities for a financial institution eg. life insurer, general insurer or pension scheme.
Certify:
- proper RECORD being kept for valuing liabilities
- proper PROVISION for liabilities made
- PREMIUMS / contributions for future years will be sufficient, to meet commitments.
- Assets/liabilities are valued in accordance with any legislative rules
- liabilities valued in the context of the assets, which are valued according to the appropriate rules
- statement of the difference btn assets and liabilities
- He/she has complied with professional guidance.
6 principles of the Actuaries’ Code
- integrity
- impartiality
- communication
- competence and care
- compliance
- speaking up (whistleblowing)
SAP vs APN
- Standard Actuarial Practice is compulsory to follow and failure to do so may result in a disciplinary process
- Actuarial Practice Notes are guidelines and any departures from it must be outlined
Proportionality Definition
Work performed must be proportionate to:
- Scope of the decision/assignment it relates to
- Benefit users expect to obtain from the work
Materiality Definition
Matters are material if they could
… individually or collectively …
INFLUENCE the DECISIONS to be taken by users of the related actuarial information.
Assessing materiality is a matter of reasonable judgement which requires consideration of the users and the context in which the work is performed and reported.
3 groups of principles when considering the application of a principle in TAS
- Principle is not applicable
- Is applicable but its inclusion is not material to the decision
- Is applicable and its inclusion is material to the decision.
Professionalism
Way in which an actuary carries out the work and presents the advice resulting from the use of the skills acquired.
Requirements to operate as a professional actuary in the workplace with coworkers & clients:
- recognises VIEWS of others
- detachment from own circumstances
- acts with INTEGRITY
- good COMMUNICATOR
- gives sound ACTUARIAL ADVICE (due to competence and skills)
- develops a direct, personal and trusting RELATIONSHIP with client (to suitable solutions).
Knowing the client
- Sufficient BACKGROUND about the client to put the task into context -> info. in the public domain eg. accounts, websites
- Have a pre-project meeting with the client
- Actuary should consider RISK APPETITE & CULTURE of the client
- Aware of CIRCUMSTANCES & OBJECTIVES of the client
- Aware of any potential CONFLICTS of interest within the actuarial firm
Procedure for completing a task at work
- agree exactly WHAT “the task” is; problems to be addressed
- gather & assess available INFORMATION
- decide on a METHOD
- set ASSUMPTIONS
- arrive at “the SOLUTION(s)”
- check the SOLUTION
- COMMUNICATE the answer
Questions to ask before embarkation on a task
- How will the results be REPORTED & to whom.
- What will the IMPLICATIONS of results be & for whom.
- How will implementation of the results of proposals be MONITORED?
- What can be learnt from the actual outcomes compared with those expected?
- What RESOURCES are required?
- Is the TIMESCALE for task completion reasonable?
- What EXPERTISE is required?
- Will the advice be used for EXECUTIVE action or is it purely advisory?
Issues regarding “what is the problem?”
- WHO owns the problem
- WHAT are the questions that need answering?
- CAN it be broken down into smaller problems?
- WILL answers be relevant in finding an optimal solution to the problem?
