Chapter 4: Professional Guidance Flashcards
Actuarial Governance Board (AGB)
The Actuarial Governance Board is an external, independent body that enhances governance in the actuarial profession in South Africa.
The profession is self-regulated, and by ensuring rigorous governance standards, the AGB augments this self-regulation in the public interest.
The AGB is established in terms of Article 5A of the Constitution of the Actuarial Society. It comprises of at least four, and a maximum of six members.
Members are nominated by the Council of the Actuarial Society, the Financial Services Board, the Chief Justice of the Republish and the South African Institute of Chartered Accountants.
Standards of Actuarial Practic
SAPs are standards that all members must adhere to.
A material breach of the SAP will in itself be ground for a complaint under the disciplinary procedures and will amount to strong prima facie evidence of unprofessional conduct.
A member choosing to depart from a strict interpretation of a SAP is strongly advised to disclose and justify any such departure in his report.
Advisory Practice Notes (APNs)
APNs provide advice to members to guide them in their relevant area of practice.
Failure to comply with an APN will not in itself constitute grounds for complaint under the disciplinary procedures.
However, the Committee investigating an allegation of unprofessional conduct will take into account the extent to which a member complied with an APN in this category.
It is recommended that any departure from an APN be disclosed.
General Insurance APN
One specific document relating to reserving referred to as:
APN401: Establishing Technical Provisions for Short-term Insurers
The objective of APN401
To provide assistance to members of the Actuarial Society in determining a value of the insurance reserves of a short-term insurance company.
Under which circumstances should a member of ASSA follow the guidance provided in APN401?
Members of the Actuarial Society of South Africa who are estimating the value of technical provisions for short-term insurers in a professional capacity in the following circumstances, but not limited to:
- Published financial statements of the insurer
- Statutory reporting (when deviating from prescribed methods)
- Independent valuations.
List the 14 sub-sections of the “Technical provision estimates for statutory reporting” section of APN401
- Introduction
- Components
- Data
- General methodology
- Obtaining central estimates and margins
- Use of case estimates
- Inflation
- Discounting
- Expenses
- Gross/net of reinsurance and other recoveries
- Run-off/wind-up basis
- Materiality
- Reasonableness of significant results
When calculating technical provisions, which factors should be considered in arriving at an appropriate discount rate to be used?
(6)
- Expected future investment returns on a portfolio of assets appropriate to the liabilities, bearing in mind the term, nature and currency of the liabilities
- The rate of return on specific matching assets. It is normally presumed that as far as possible, technical provisions are matched by fixed interest investments and cash, rather than securities and creditors.
- Yields on fixed interest securities
- An allowance for tax
- Allowance for default risk
- Consistency with inflation assumptions
ASSA Code of Professional Conduct
Gives general guidance on professional conduct to which all actuaries and candidates must conform in both the spirit and the letter.
This document came into effect on 1 July 2012, and replace the previous Professional Conduct Standards of the Actuarial Society of South Africa (PCSSA), which was to have been read in conjunction with the Professional Conduct Standards (PCS) issued by the Professional Affairs Board of the Faculty and Institute of Actuaries.
Explanatory notes to the ASSA Code of Professional Conduct
Explanatory Notes are appendices to the Code of Professional Conduct.
They serve to provide information and elaborate on principles mentioned in the Code.
Current Explanatory Notes relate to
- Whistleblowing, and
- the Peer Review Process.
The Financial Reporting Council
The Financial Reporting Council (FRC) is the UK’s independent regulator and is responsible for promoting confidence in corporate governance and reporting.
The FRC oversees the regulatory activities of the Profession through its Professional Oversight Board (POB).
The role of the Professional Oversight Board (POB)
The POB’s role includes monitoring the profession’s
- education
- training
- CPD
- ethical matters
- professional conduct and discipline
- issuing practice certificates.
Who is responsible for setting the technical actuarial standards (TAS)?
Under the terms of the memorandum of understanding between the UK actuarial profession and the FRC, the
Board for Actuarial Standards (BAS)
is responsible for the setting of technical actuarial standards (TAS).
The profession has retained responsibility for the setting and maintenance of ethical standards which are known as Actuarial Profession Standards (APS).
4 Technical Actuarial Standards relevant to general insurance
- TAS M: Modelling
- TAS R: Reporting
- TAS D: Data
- Insurance TAS
When does TAS D apply?
TAS D shall apply in respect of all data used in preparing actuarial information which is presented in a report.
