Slide pack 5

Question 1

Why is professionalism important in actuarial role

Answer 1

Being a professional actuary - usually involved in decision making that can impact many many people. It’s important you have the utmost integrity given the large number of individuals that can be affected by your advice.

Question 2

What does professionalism mean in context of being an actuary

Answer 2

Must be trusted by their client
Being open to other views particularly important in actuarial world where there is a lot of uncertainty so getting second opinions can be helpful
Recognise there is a degree of uncertainty about everyone’s estimations
You must know what you’re doing and improve your competence over time
Quality of output and timing is all very important
Communication
Must not be biased

Question 3

Explain the concept of materiality an d proportionality with exmaple in actuarial

Answer 3

Materiality often involves a level of judgement for what is material
If you’re trying to get something to balance and you’re down to cents not matching on the balance sheet in millions. This is when you need to realize. Is this materially correct? Is there an onus on me to get this right down to the cent. Is this a proportional problem?

Question 4

What does knowing your client involve

Answer 4

• Sufficient background about the client.
• Know for whom in the client firm the work is being performed.
• Are any conflicts within the client firm, is the actuary advising for one side of an argument.
• What complaints procedures will be in place?
• Do I know who I’m providing the advice to?

Question 5

How does one deal with conflicts of inetrest

Answer 5

If one does arise : Discose it and deal with it.
Establish measures to secure independent teams working for different clients within the firm. These measures are known as chinese walls.
- especially important with electronic data

Question 6

What are the skills one must have as a professional?

Answer 6

Technical 
Communication
Influencing
Persuasion
Business acumen

Question 7

Why is professionalism important for you?

Answer 7

Your protection
Professional reputation
Your livelihood

Question 8

What are some problems professionalism can face?

Answer 8

Standards of advice
Conflicts of interest - can be complex -
Client relationships / third parties
Transmission of advice - ability to communicate your advice in a clear professional manner
How to deal with an error (dont hide it)

Question 9

What is the SAI and its aim

Answer 9

The Society of Actuaries in Ireland (SAI), of which both students and qualified actuaries are members, aims to protect the public interest and to promote public confidence in the work of actuaries.
This means ensuring its members are competent, not only in the technical skills required of an actuary, but also that they have the requisite professional skills.

Question 10

What are some features of the SAI membership

Answer 10

A fellow of the SAI must do a certain amount of professionalism training every year.
Professional framework - actuarial exams ensures people who pass them have a certain level of competency
Disciplinary schemes where there are potential breaches
Practicing certificates - ex signing actuaries

Question 11

What is the SAI code of conduct

Answer 11

Integrity - act honestly
Impartiality  - no bias
Compliance 
Communicating in an appropriate manner and taking into account who your audience is as well. 
Competence and care-

Question 12

What is the actuaries code of the IFoA

Answer 12

Integrity - act honestly
Impartiality  - no bias
Compliance 
Communicating in an appropriate manner and taking into account who your audience is as well. 
Competence and care-

Question 13

Define misconduct as per the SAI

Answer 13

Failure to comply with “the standards of behaviour, integrity, competence or professional judgment which other members or the public might reasonably expect of a member” taking into account any advice, guidance, memorandum or statement on professional conduct, practice or duties published by the Society

Question 14

What could be an implication of whistleblowing for the courageous person who stands up?

Answer 14

Whistleblower may having popularity implications and whistleblower may stand alone but this shows great strength and integrity to be able to do this action for the greater good despite this

Question 15

Define judgement

Answer 15

Judgment is the process of reaching a decision or drawing a conclusion when there are a number of possible alternative solutions.

Question 16

Define ethical judgement

Answer 16

Ethical judgment is when no best solution exists and there are (human) consequences always in every decision

Question 17

What are some examples of ethical dilemmas

Answer 17

Truth vs loyalty
Individual vs community
Short term vs Long term
Justice vs Mercy

Question 18

How can one deal with these ethical dilemmas

Answer 18

Recognize when you are making a decision
Know your own decision values
Be able to defend your reasoning
Use ethical judgement and think of transparency (if your decision was printed on the newspaper), effect and fairness
In which capacity are you acting - having clarity on your role
Arguing against yourself - devil’s advocate

Question 19

Good things for an actuary to have at work

Answer 19

Internal network easy to access
Mentor
Peer review used for key activities/work products
Clear responsibility and chain of command
You can say no to work
Manage any internal pressure to pick “sides”
External network also adds flexibility and viewpoints
E&O insurance in place (PI insurance)

Question 20

What are the consequences of getting a project or task wrong?

Answer 20

Disappointment in yourself – stress, regret
Impact on your family - working late to meet unrealistic timeline
Career – no job, finances impacted - you didn’t have the right skills etc
Shame – loss to your colleagues
Professional – disciplinary scheme
Future prospects – say goodbye to directorships, positions of trust

Question 21

Explain a stakeholder

Answer 21

Stakeholder some entity who is impacted by a particular thing - particular professional decision. All decision in work will have professional consequences

Question 22

What to consider about stakeholders

Answer 22

What are the shareholders interests and Are there any conflicts of interest in the stakeholders, What’s their level of expertise -so you can communicate your decision paths correctly to them. Also why is the stakeholder engaging with you?

Question 23

Who are the stakeholders that are actuary clients

Answer 23

Consultancy work - very obvious clients

Internally can have client - junior actuary may report to senior actuary in a big insurance firm.

Question 24

Define indicative advice

Answer 24

giving an opinion without fully investigating the issues — for example in response to a direct oral question

Question 25

Define factual advice

Answer 25

based on research of facts e.g. legislation -perhaps piece of EU insurance legislation and advising on the facts associated with this

Question 26

Define recommendations

Answer 26

researched and modelled forecasts, alternatives weighted, recommendations made consistent with requirements - ex: if you’re recommending hold a level of reserves of X amounts. Have you considered alternatives, have you a range of possible best estimate reserves, have you attempted to quantify the uncertainty around your estimate when providing those recommendations

Question 27

Who are four providers of benefits?

Answer 27

The state
Employers
Individuals
Financial institutions and corporations

Question 28

What is the role of the state in providing benefits

Answer 28

Provide benefits to some or all of the population educate or require education about the importance of providing for the future
Regulate to encourage or compel benefit provision by or on behalf of some of the population
Regulate bodies providing benefits, and bodies with custody of funds, in an attempt to ensure security for promises made, or expectations created

Question 29

What is the role of the employer in providing benefits

Answer 29

Pensions scheme - may encourage contributions to that scheme from employees by matching their contributions

Question 30

Why might an employer contribute to an employees pension

Answer 30

Compulsion or encouragement from the State
A desire to look after employees and their dependants financially beyond the level provided by the State
A desire to attract and retain the services of good quality employees
pooling of expenses and expertise

Question 31

What can impact ones perspective of risk

Answer 31

Broader narrative, persons character

Question 32

Name different perspectives one risk

Answer 32

Academic
Poet
Trader
Psychology
Philosophy
Political science
Ancient Athenian
Historical
Sport
Successful investors

Question 33

Why is risk welcomed?

Answer 33

Risk ro volatility can be welcomed as it does bring returns -act of writing insurance policies is always risky but if you don’t take any risk you are not going to become successful in that field

Question 34

What is the risk management process

Answer 34

• Assessing the risks faced: Identification, assessment/impact, Financing the risks
• Adoption of risk control measures
• Monitoring the risk portfolio

Question 35

Give examples of financial risks

Answer 35

Market risk, Credit risk, Business risk, liquidity risk

Question 36

Give examples of non financial risks

Answer 36

Operational risk, External risk

Question 37

Whats the difference between systematic and diversifiable risk

Answer 37

Systematic - cant get away from it
Diversifiable - we can diversify away from
There is a trade off between spreading out your assets to get smaller return or concentrating all assets into one security

Question 38

Define risk appetite

Answer 38

Level of risk you are comfortable with taking. A company will have a level of risk they are comfortable with taking.

Important when deciding on your risk appetite to have the full narrative

Question 39

What is a weak narrative

Answer 39

A weak narrative is an inadequate description / story of a problem or situation that allows only a mere description of it rather than a description which has sufficient depth and clarity to facilitate a solution in the form where a progressive outcome can arise

Question 40

Define herd like behaviour and when it arises

Answer 40

Herd like behaviour - an individual is overly influenced by the group she is in. Or from another perspective,
Arises when there is an inadequate amount of individual thought to counteract the influence of the group in arriving at their decisions.

Question 41

Define agency risk

Answer 41

Agency risk is the risk resulting from the misalignment of interests between managers, employees and shareholders, and potentially also with other stakeholders, including society in general - conflicting interests. Transparency is important and communication

Question 42

What are qualities of a risk to be insurable?

Answer 42

The policyholder must have an interest in the risk being insured.
A risk must be of a financial and reasonably quantifiable nature
The amount payable by the insurance policy in the event of a claim must bear some relationship to the financial loss incurred.

Question 43

What are other favourable criteria for a risk to have for insurance company

Answer 43

Individual risk events should be independent of each other
Ideally risk has small probability
Similar risks should be pooled to reduce variance
There should be a limit of liability undertaken by insurer
Moral hazards should be eliminated - cant quantify
There should be sufficient information to estimate the extent of risk and its probability.