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MRA > Chapter 1: Actuarial Advice > Flashcards

Chapter 1: Actuarial Advice Flashcards

1
Q

Long list of all stakeholder (31)

A
  1. Public
  2. Pension funds
  3. Banks
  4. Reinsurers
  5. State
  6. Investment consultants
  7. Tied agents (A person who sells policies for only one insurance company)
  8. Trustees (of pension funds)
  9. Fund administrator (of pension fund)
  10. Auditors
  11. Industry bodies (ASSA)
  12. Ombudsman ( provides an independent, impartial, fair, timely and efficient dispute resolution process that is free to consumers)
  13. Policyholders
  14. Tax authorities (SARS)
  15. Asset managers
  16. Dependents/beneficiaries
  17. Employers
  18. Investors
  19. Independent advisors/ brokers
  20. Competing insurers
  21. Medical schemes
  22. Financial press
  23. Insurers
  24. Employees (of companies)
  25. Board of directors (of insurer)
  26. Professional bodies (e.g. ASSA)
  27. Shareholder (of insurer)
  28. Other distributors (direct marketing)
  29. Members (of pension funds)
  30. Regulators (FSB, SARB)
  31. Credit rating agencies
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2
Q

List 7 stakeholder groups & their “personalities”

A
  1. Sponsor (3. I want to help but help but it should not cost too much)
  2. Provider/vehicle (2. I can help make money by helping users)
  3. Services provider (4. I’m an expert I can make money by helping providers)
  4. Management (7. Profits! Efficiencies! Don’t get arrested)
  5. Distribution (5. I can link providers with customer and make money)
  6. User (1. I need help but I don’t what’s going on)
  7. Oversight (6. Protect the users)
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3
Q

List stakeholders who are ‘Sponsors’ (2)

A

> State
Employers

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4
Q

List stakeholder who are ‘users’ (7)

A
  1. Public (potential customers)
  2. Policyholders
  3. Members
  4. Dependents/beneficiaries
  5. Employers
  6. Employees (of companies)
  7. Investors
  8. Insurers
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5
Q

List stakeholder who are “providers/vehicle”(5)

Who provides the products?

A

> Medical schemes
Pensions funds
Banks
State (sponsors)
Insurer
Employers

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6
Q

List stakeholder who are “Service providers”(4)
Who provides the services?

A

> Reinsurers
Investment consultants
Administrators
Asset managers
Actuaries, underwriters, IT, Legal

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7
Q

List stakeholder who are “Distributors”(3)
Who distributes the product/service?

A

> Tied agents
Brokers
Direct sales

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8
Q

List stakeholder who are involved in “Oversight”(11). Who keeps providers in line

A

> Ombudsman
Competing insurers
Regulators
Tax authorities
Professional bodies
Industry bodies
Auditors
State
Public
Financial press
Credit rating agencies

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9
Q

List stakeholder who are involved in “Management”(3)
Who manages/owns the products?(+2)

A

> Trustees
Board of directors
Shareholders
Fund administrator
Asset manager

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10
Q

Who provides funding/capital

A

> Creditors (e.g. bank)
Capital providers (e.g. investors/shareholders)

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11
Q

How do actuaries serve stakeholder?
List 3 types of advice

A

The main service actuaries provide is ADVICE:
The are different type of advice.

Factual advice - assist with research of facts
(e.g. calculating actual lapse rate)

Indicative advice - provide an opinion without research
(e.g. comment on FSB papers, review member communication documents)

Recommendations - Use of research and/or modelling and/or forecasts to generate alternatives than are then weighed
(e.g. profit testing, recommending DB contribution rate)

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12
Q

In giving advice the actuary should..? (2 points)

A

> Outline assumptions made and the reasons for making them
Set out alternative solutions and the implications of each solution on both the client and on other affected stakeholders

Client usually makes final decision

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13
Q

What if the actuary makes the final decision? what should they consider.

A
  1. Seek further advice or peer review (good demonstration to regulators, auditors, and customer that sound practices are being followed)
  2. Rationale behind any decision take should be properly documented,
  3. Include documentation of alternatives that have been considered
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14
Q

What are 4 differences of stakeholders?

A
  1. Different needs
    > due to age, dependents, financial situation, geographical location, etc
  2. Different information/knowledge
    > Sophistication; awareness; access to information
  3. Different risk appetites
    > Dependent on unique characteristics
  4. Conflicts of interest
    > Giver of advice stands to benefit
    > parties with opposite interest
    > Ways to manage?
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15
Q

Who are public sector stakeholder that actuary may advice? (3)

A

> Central and local government departments
Regulatory bodies (ensuring regulatory requirements are met)
Central banks

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16
Q

What areas can actuaries provide advice to current and potential future policyholder? (6)

A

> personal protection against death and illness
protection of property
Investment
retirement planning
protection against requiring long-term home or nursing care
protection against personal liability claims (e.g. for causing motor accident)

17
Q

What areas can actuaries provide advice to employers? (7)

A

➢ Protection against financial loss resulting from sickness or death
➢ Protection of assets
➢ Provision of work-related benefits=> attract and retain staff
➢ Meeting legislative requirements
➢ Managing the cost of running a business
➢ Quantification of surplus capital
➢ Investment of surplus capital

18
Q

What areas can an actuary provide advice to a board of directors from? (8)

A

➢ Meeting legislative requirements
➢ Investment and management of assets
➢ Managing liabilities
➢ Determining provisions
➢ Setting premium rates
➢ Meeting policyholders’ reasonable expectations
➢ Good corporate governance
➢ Re requirements

19
Q

What areas can actuaries provide advice to the trustees of benefit schemes in? (3)

A

> managing the assets of the scheme
paying the benefits promised under the scheme as they fall due
Maintaining solvency

20
Q

What areas can actuaries provide advice to the sponsors of benefit schemes in? (4)

A

➢ Providing protection benefits=> Meet the need of members and dependants
➢ Providing retirement benefits=> meet the needs of members
➢ Managing the cost of providing benefits
➢ Meeting legislative requirements

21
Q

What areas can actuaries provide advice to government in?

A

➢ Setting legislation=> impacts provision of financial products schemes, contracts and transactions that provide benefit on future financial events
➢ Monitoring the adherence to this legislation
➢ Funding benefit provision by state
➢ Monitoring the funding of benefit provision by state

22
Q

What information should the actuary research to provide appropriate information?

A

➢ Company accounts
➢ Other published information
➢ Clients website
➢ Meeting and less formal discussion with clients=> understand clients culture

23
Q

When an actuary is giving advice to a client who must make a decision on that advice, what factors should be considered? (6)

A

➢ Set out alternative solutions=> implication for the client and other stakeholder
➢ Set out and explain the implications of each alternative solutions=> recommended or not
➢ Set out assumptions made and reason for making the assumption
➢ Be aware of who the client is
➢ Avoid conflicts of interest
➢ Consider whether other professionals should be involved in giving advice

24
Q

What should an actuary do if they are both giving advice and making the final decision? (4)

A

➢ Peer review
➢ Seek opinion from other professionals
➢ Rational behind any decision=> properly documented
➢ Including documentations for alternatives

25
Q

What do the IFoA standards refer to and to whom do they apply?

A

➢ Ethical and professional best practise standards
➢ Responsibility of the IFoA
➢ Including the Actuaries’ code
➢ Apply to all members of the profession
➢ Regardless of the territory or area of work in which they operate
➢ The IFoA’s professionalism framework also includes:
i. Continuing professional development
ii. Professional skills training
iii. Technical actuarial standards=> Responsibility of the FRC rather than IFoA

26
Q

What are 6 principles of Actuaries’ code

A
  1. Integrity
  2. Competence and care
  3. Impartiality
  4. Compliance
  5. Speaking up
  6. Communication
27
Q

What are the aims and application of TAS (Technical Actuarial Standard)?

A

Users of actuarial information can have confidence in:
i. Information relevance
ii. Transparency of assumptions
iii. Completeness and comprehensibility
iv. Communication of any uncertainty inherent in the information

28
Q

What are the 4 TAS?

A

➢ TAS 100: Principles for technical actuarial work (covering judgement, data, assumptions, models, communication and documentations)
➢ TAS 200: Insurance
➢ TAS 300 Pensions
➢ TAS 400 Funeral plan trusts

29
Q

What is the definition of materiality in the TAS?

A

➢ Material=> at the time work is performed
➢ The effect of departure from TAS requirements
➢ Could influence the decision of
➢ Users of actuarial information
➢ Implies that a principle in a TAS
➢ Can be ignored if its inclusion
➢ Will not have a material impact on a decision

MRA (19 decks)

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