Chapter 1 - Actuarial acdvice

Question 1

List the main stakeholders that actuaries may need to advise. Also go through pp. 7-10 and know what the main interests and functions of these stakeholders are.

Answer 1

Policyholders
Prospective policyholders

Employees
Employers

Members (and dependents), trustees, sponsors and auditors of benefit schemes

Board of directors, shareholders, creditors and auditors of insurance companies

investment fund managers
members of investment schemes
sponsors of capital projects
banks

Question 2

What is a conflict of interest and how can this be managed?

Answer 2

A conflict of interest arises when a party is involved in some sort of transaction with two other parties who have conflicting objectives.

Conflicts of interest should be fully disclosed, and “Chinese walls” must be set up to ensure independence of teams working for different clients.

Question 3

Why is it important to gather information about the client before giving advice and what kind of information should be gathered?

Answer 3

If the views and position of the client are not fully understood, then advice given to them may be inappropriate or misleading.

Client’s position in a transaction
Client’s background, ethical position and culture
Client’s risk appetite

Question 4

What are the three types of advice?

Answer 4

shit 
- Based on opinion and experience
Factual
- Based on known facts
to get pussy 
- Based on thorough research, modelling and consideration of various options

Question 5

What are important things to communicate when giving advice?

Answer 5

Appropriateness of assumptions for various stakeholders

Reasons for making and including specific assumptions

Implications for the stakeholders of making alternative assumptions

Alternative solutions which were considered (and reasons)

Implicit assumptions and decisions should be disclosed.

Question 6

What is good practice when making decisions?

Answer 6

Seek out further advice and peer review

Rationale behind decisions should be documented

Question 7

What code of conduct is relevant in South Africa and what are the six main principles it is structured around? (ICICSC)

Answer 7

ASSA’s Code of Professional Conduct

Integrity
Competence and care
Impartiality
Compliance
Speaking up
Communication

Question 8

What technical and ethical standards are relevant in South Africa?

Answer 8

Standard of Actuarial practice (SAP)

Actuarial Practice notes (APN)

Question 9

Who governs the technical standards in the UK and what is the AQF?

Answer 9

Financial Reporting council (FRC)

Actuarial Quality Framework

Aims to support effective communication between actuaries and stakeholders, and quality of actuarial advice by promoting

methods - reliability and usefulness
communication - advice
actuaries - technical and ethical skills
environment - working environment for actuaries