Chapter 1: Actuarial Advice Flashcards
Possible clients whom actuaties can advice in the private sector
Insurance Company:
* policyholders
* prospective policyholders
* board of directors
* shareholders
* creditors
* auditors
Benefit Schemes:
* members and their dependants
* trustees
* sponsors of benefit schemes
* employers
* auditors of the sponsers
Other:
* Employees
* Investment fund managers
* members of investment schemes
* sponsors of capital projects
* banks
List of public sector stakeholders that an actuary can advice
- Central and local government departments
- Regulatory bodies
- Central banks
List 6 areas in which actuaries can provide advice to prospective policyholders
- personal protection against death and illness
- protection of property
- investment
Other:
* retirement planning
* protection against long-term care
* protection agains personal liability claims (e.g. for causing a motor accident).
List 7 areas in which actuaries can provide advice to employers
- protection against financial loss arising from death or illness of employees
- protection of assets
- provision of work-relatd benefits that will attract and retain good quality staff.
- meeting legislative requirements
- managing the cost of running the business
- quantification of the amount of surplus capital in the business
- investment of surplus capital
List 8 areas in which actuaries can provide advice to the board of directors of an insurance company
- Meeting legislative requirements
- Investment and management of assets
- Managing liabilities
- Determining provisions
- Premium rating
- Meeting policyholders;s reasonable expectations (PRE)
- Good coporate governance
- Reinsurance requirements
List 12 stakeholders involved in a pension scheme
- Members
- Members’s dependants
- Trustees
- Shareholders of the sponsor
- Directors of the sponsor
- Creditors of the sponsor
- Employees of the sponsor (who are not scheme members)
- Regulatory bodies
- Government
- Administrators
- Investment fund managers
- Auditors / Accountants
List 3 areas in which actuaries can provide advice to trustees of benefit schemes
- Managing the assets of the scheme
- paying the promised benefits under the scheme as they fall due
- maintaining solvency
List 4 areas in which actuaries can provide advice to the sponsor of a benefit scheme
- Providing protection benefits that meet the needs of the members and their dependants
- Providing retirement benefits that meet the needs of the members
- Managing the cost of providing the benefits
- Meeting legislative requirements
List 3 areas actuaries can advice Employees
- provision of protection benefits on death and sickness
- provision of pension benefits on retirement
- investment of surplus personal funds
List 3 areas in which actuaries can provide advice to Sponsors of capital projects
- assessment of risks underlying the project
- consideration of mitigating techniques
- evaluation of future cashflows
List 4 areas in which actuaries can provide advice to the government
- Setting legislation that impacts on the provision of financial products, schemes, contracts and transactions that provides benefits on future financial events
- Monitoring the adherence to the legislation
- Funding benefit provision by the state
- Monitoring the funding of benefit provision by the state
List 4 sources an actuary can use to get information about a client
- Company accounts
- other published information
- Client’s website
- Meetings and less formal discussions with the client, to understand the client’s culture
Chinese Walls
Measures to ensure the independance of teams working for different clients within a firm (physical and electronical seperation).
List information that would be sought from a customer before advising on an appropriate savings vehicle
- amount of funds to invest
- timing of investment e.g. lump sum or regular investment
- risk appetite
- need for liquidity
- short/long-term plans
- age
- health status
- tax status
- amount of control desired over investment
- other assets held
- inheritance issues
- liabilities
- need for flexibility
Other areas in a regulated sales process:
* types of product bought to the market
* who can sell (qualifications)
* information to be disclosed
* basis for illustrations
* cooling-off period
What are the 3 different types of advice an actuary can give?
FIR
* Factual: based on research of facts e.g. legislation
* Indicative: giving an opinion without further investigating the issues
* Recommendations: Research and modelled forecasts, alternatives weighted, recommendations made consistent with requirements, work normally peer-reviewed
6 Principles of the Actuaries’ Code of Conduct
- integrity
- competence and care
- impartialty
- communication
- speaking up
- compliance
What are the aims of the TASs
To ensure that the users of actuarial information can have confidence in that information’s relevance, transparency of assumptions, completeness and comprehensibility, including the communication of any uncertainty inherent in the information.
What is the definition of “materiality” in the TASs?
Something is material if, at the time when the work is performed, the effect of the departure from the TAS requirement could influence the decision to be taken by the users of the resulting actuarial information.
This mean that a principle can be ignored if it is felt that its inclusion would not have a material effect on the decision.
What are the 4 drivers of the Actuarial Quality Framework?
The Financial Reporting Council has developed an Actuarial Quality Framework which is designed to support effective communication between actuaries and other stakeholders in actuarial work.
- methods: Reliability and usefulness of actuarial methods
- Communication: Communication of actuarial information and advice
- Actuaries: Technical skills of actuaries and ethics and professionalism of actuaries
- Environment: Working environment of actuaries and other factors outside their control
Requirements to operate as a professional actuary
- recognises the 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 the client (to suitable solutions)
