Current CAS Issues Current CAS Issues and Directionsand Directions

Robert F Wolf (Bob)

CAS Board of Directors

Director, Navigant Consulting, Inc.

Midwest Actuarial Forum 3/17/06

Allstate, Northbrook, IL

AgendaAgenda CAS Centennial Goal / ERM InitiativesCAS Centennial Goal / ERM Initiatives

Governance Initiatives on 2006 BallotGovernance Initiatives on 2006 Ballot

Task Force on Actuarial CredibilityTask Force on Actuarial Credibility

Task Force on PublicationsTask Force on Publications

Basic Education InitiativesBasic Education Initiatives

Research Working PartiesResearch Working Parties

Continuing EducationContinuing Education

Image of the Actuary CampaignImage of the Actuary Campaign

Your InputYour Input

CAS Centennial GoalCAS Centennial Goal

The CAS will be The CAS will be globallyglobally recognized as recognized as the preeminent resource in educating the preeminent resource in educating casualty actuaries and conducting casualty actuaries and conducting research in casualty actuarial science. research in casualty actuarial science. CAS members will be recognized as the CAS members will be recognized as the leading experts in the evaluation of leading experts in the evaluation of hazard risk and the hazard risk and the integrationintegration of of hazard risk with strategic, financial and hazard risk with strategic, financial and operational risk.operational risk.

Implementing the Implementing the Centennial GoalCentennial Goal

SSignificant, ignificant, AAttainable, ttainable, MMeasurable Goalseasurable Goals Interim milestones to help gauge progress Interim milestones to help gauge progress

towards the Centennial Goal.towards the Centennial Goal. 2006 LRPC Goal: Critically review the SAM Goals.2006 LRPC Goal: Critically review the SAM Goals.

Environmental Scans – Challenges:Environmental Scans – Challenges: Competition for Risk Integration & ERM ServicesCompetition for Risk Integration & ERM Services Marketing Actuarial SkillsMarketing Actuarial Skills VolunteerismVolunteerism InternationalismInternationalism Quantification SkillsQuantification Skills Reputation of the Actuarial ProfessionReputation of the Actuarial Profession

ERM InitiativesERM Initiatives

During 2005, the CAS Board took actions to During 2005, the CAS Board took actions to help the actuarial profession benefit from help the actuarial profession benefit from new opportunities in Enterprise Risk new opportunities in Enterprise Risk Management:Management: Approved CAS/SOA Risk Management Section.Approved CAS/SOA Risk Management Section. Launched partnership with Enterprise Risk Launched partnership with Enterprise Risk

Management Institute International, Ltd. Management Institute International, Ltd. (ERMII). (ERMII).

Created new Vice President of Risk Integration Created new Vice President of Risk Integration and ERM position to oversee ERM-related and ERM position to oversee ERM-related activities.activities.

Formed ERM Task Force to examine the CAS.Formed ERM Task Force to examine the CAS.

Risk Management Risk Management SectionSection

Similar to the existing CAS special Similar to the existing CAS special interest sections CARe and AIR.interest sections CARe and AIR.

Both CAS and SOA members are Both CAS and SOA members are eligible to serve on the Council that eligible to serve on the Council that guides the activities of the Section.guides the activities of the Section.

Members are encouraged to join the Members are encouraged to join the Section. Annual dues are only $20.Section. Annual dues are only $20.

Learn more on the CAS Web Site Learn more on the CAS Web Site About CAS About CAS CAS Special Interest CAS Special Interest Sections.Sections.

Other ERM Other ERM InitiativesInitiatives

ERMII is a private, not-for-profit, ERMII is a private, not-for-profit, independent educational and research independent educational and research organization led by CAS Fellow Shaun organization led by CAS Fellow Shaun Wang.Wang.

ERMII is co-sponsored by an international ERMII is co-sponsored by an international group of universities and professional group of universities and professional organizations including Georgia State organizations including Georgia State University, University of New South University, University of New South Wales, University of Illinois, Wuhan Wales, University of Illinois, Wuhan University (China), and the CAS.University (China), and the CAS.

VP-Risk Integration and ERM to oversee VP-Risk Integration and ERM to oversee and coordinate ERM-related activities. and coordinate ERM-related activities.

Other ERM Other ERM InitiativesInitiatives

CAS ERM Task ForceCAS ERM Task Force Goal: Spotlight the CAS itself as an Goal: Spotlight the CAS itself as an

example of ERM best practices.example of ERM best practices. Charge: Implement an ERM process for Charge: Implement an ERM process for

the CAS, report on the outcome of this the CAS, report on the outcome of this effort by the September 2006 Board effort by the September 2006 Board meeting, and prepare an article, meeting, and prepare an article, authored by the Executive Director and authored by the Executive Director and the President, for placement in a the President, for placement in a magazine such as magazine such as Association Association ManagementManagement. .

Other ERM Other ERM InitiativesInitiatives

ERM Credential (SOA Initiative)ERM Credential (SOA Initiative) Board response – The CAS:Board response – The CAS:

Discourages consideration of an independent ERM Discourages consideration of an independent ERM credential sponsored by the actuarial profession.credential sponsored by the actuarial profession.

Should focus on enhancing the role of actuaries in Should focus on enhancing the role of actuaries in ERM by: ERM by:

Providing continuing education, conducting research, Providing continuing education, conducting research, promoting actuarial skills in addressing ERM issues, and promoting actuarial skills in addressing ERM issues, and exploring changes to the CAS basic education syllabus.exploring changes to the CAS basic education syllabus.

Favors a partnership with ERMII -- support ERMII Favors a partnership with ERMII -- support ERMII in its education and research, particularly as these in its education and research, particularly as these initiatives enhance the role of actuaries in ERM.initiatives enhance the role of actuaries in ERM.

Looks forward to a continuing partnership with the Looks forward to a continuing partnership with the SOA in enhancing opportunities for actuaries in SOA in enhancing opportunities for actuaries in ERM.ERM.

ACAS Right to VoteACAS Right to Vote

Right to voteRight to vote should be granted upon earlier should be granted upon earlier of: Fellowship or five years after admission of: Fellowship or five years after admission as a member.as a member.

All voting members should be allowed to All voting members should be allowed to stand for election to the stand for election to the Board of DirectorsBoard of Directors..

Voting Associates may hold all Voting Associates may hold all officer officer positionspositions, with the exception of:, with the exception of: PresidentPresident President - ElectPresident - Elect Vice President - Admissions Vice President - Admissions

ACAS Right to VoteACAS Right to Vote Voting rights unchanged since 1914; reflect a time Voting rights unchanged since 1914; reflect a time

when there was a greater difference between when there was a greater difference between classes.classes.

Associates are an important part of the Society:Associates are an important part of the Society: 25-30% of Associates no longer take exams. 25-30% of Associates no longer take exams. Many Associates contribute extensively to the profession Many Associates contribute extensively to the profession

as volunteers, on committees, as speakers and authors, as volunteers, on committees, as speakers and authors, etc.etc.

Contributions as practitioners; they have equal practice Contributions as practitioners; they have equal practice rights.rights.

Associates pay full dues, but cannot vote.Associates pay full dues, but cannot vote. Mutual Recognition issues.Mutual Recognition issues.

Ought an ACAS have the same vote as a MR CAS member Ought an ACAS have the same vote as a MR CAS member ??

Task Force on Task Force on GovernanceGovernance

Board proactively considers Board proactively considers governance issues by allotting time governance issues by allotting time during Board meetings for during Board meetings for discussion.discussion.

Formed Board Task Force on Outside Formed Board Task Force on Outside Representation in CAS Governance Representation in CAS Governance Process in March 2005.Process in March 2005.

Charged with considering the role of Charged with considering the role of outside representation in the CAS outside representation in the CAS governance process. governance process.

Task Force on Task Force on GovernanceGovernance

1.1. Appointed (Non-Actuary) Board MembersAppointed (Non-Actuary) Board MembersCreate a class of Board Members consisting of Create a class of Board Members consisting of up to three additional Board Members to be up to three additional Board Members to be appointed by the Board.appointed by the Board.

2.2. Academy Role at CAS Board MeetingsAcademy Role at CAS Board MeetingsParticipation at Board Meetings by the Participation at Board Meetings by the Casualty Vice President of the AAA should be Casualty Vice President of the AAA should be formalized through policy or, if formalized through policy or, if recommendation #1 is implemented, through recommendation #1 is implemented, through an appointment to the Board.an appointment to the Board.

3.3. Executive Director as Member of Executive Executive Director as Member of Executive CouncilCouncilThe Executive Director should be officially The Executive Director should be officially designated as a member of the Executive designated as a member of the Executive Council.Council.

Why Have Appointed, Why Have Appointed, Non-Actuary Board Non-Actuary Board

Members?Members? Better Decision-MakingBetter Decision-Making

Broader input is always better in Broader input is always better in setting strategy and policy.setting strategy and policy.

Move away from inward thinking.Move away from inward thinking. PerceptionPerception

Prevailing schools of thought on Prevailing schools of thought on governance endorse this approach.governance endorse this approach.

Positions CAS as outward looking and Positions CAS as outward looking and forward thinking.forward thinking.

Task Force on Task Force on Actuarial CredibilityActuarial Credibility

Established to identify, prioritize, Established to identify, prioritize, and investigate the feasibility of and investigate the feasibility of possible strategies for enhancing the possible strategies for enhancing the perceived credibility of the actuarial perceived credibility of the actuarial profession and to develop action profession and to develop action plans for implementation of those plans for implementation of those strategies considered to have the strategies considered to have the greatest potential for high impact.greatest potential for high impact.

Task Force on Task Force on Actuarial CredibilityActuarial Credibility

1.1. Enhance the transparency of the Enhance the transparency of the actuary’s conclusions by clearly actuary’s conclusions by clearly identifying differences between identifying differences between management’s “best estimate” and the management’s “best estimate” and the actuary’s “best estimate.”actuary’s “best estimate.”

2.2. Enhance the public’s understanding of Enhance the public’s understanding of actuarial estimates.actuarial estimates.

3.3. Improve the transparency of disclosures Improve the transparency of disclosures by requiring that the actuarial report by requiring that the actuarial report contain an exhibit that summarizes contain an exhibit that summarizes changes in the actuary’s estimates from changes in the actuary’s estimates from one period to the next.one period to the next.

Task Force on Task Force on Actuarial CredibilityActuarial Credibility

4.4. Enhance the quality of corporate governance Enhance the quality of corporate governance by educating audit committees or board of by educating audit committees or board of directors or both on the roles and directors or both on the roles and responsibilities of the appointed actuary.responsibilities of the appointed actuary.

5.5. Enhance the self-governance of the profession Enhance the self-governance of the profession by requiring the appointed actuary to provide by requiring the appointed actuary to provide an explanatory document with the ABCD an explanatory document with the ABCD whenever the change in the actuary’s reserve whenever the change in the actuary’s reserve estimates over a defined period exceeds estimates over a defined period exceeds certain predetermined thresholds..certain predetermined thresholds..

6.6. Elevate the unique role of the appointed Elevate the unique role of the appointed actuary within the statutory financial reporting actuary within the statutory financial reporting environment by incorporating an Actuarial environment by incorporating an Actuarial Statement within the Jurat Page of each Statement within the Jurat Page of each company’s Annual Statement.company’s Annual Statement.

Task Force on Task Force on Actuarial CredibilityActuarial Credibility

Task Force Report presented to the Task Force Report presented to the CAS Board in May 2005. Board CAS Board in May 2005. Board accepted the Report and directed the accepted the Report and directed the EC to implement recommendations as EC to implement recommendations as appropriate.appropriate.

Two additional Task Forces formed:Two additional Task Forces formed: Joint Task Force for Enhancing the Joint Task Force for Enhancing the

Reputation of Casualty ActuariesReputation of Casualty Actuaries CAS Task Force for Enhancing the CAS Task Force for Enhancing the

Reputation of Casualty ActuariesReputation of Casualty Actuaries

CRUSAPCRUSAP

Critical Review of the U.S. Actuarial Profession Critical Review of the U.S. Actuarial Profession (CRUSAP) Task Force formed by the AAA(CRUSAP) Task Force formed by the AAA..

CRUSAP will identify and analyze risks and CRUSAP will identify and analyze risks and opportunities facing the actuarial profession opportunities facing the actuarial profession and provide recommendations for meeting and provide recommendations for meeting emerging challenges. emerging challenges.

30 members serve on the CRUSAP advisory 30 members serve on the CRUSAP advisory panel.panel.

Fred Kilbourne is chairperson of the CRUSAP Fred Kilbourne is chairperson of the CRUSAP Task Force. Task Force.

See See www.crusap.netwww.crusap.net for more information. for more information.

Task Force on Task Force on PublicationsPublications

RecommendationsRecommendations1.1. Remove papers from PCAS. Keep CAS-Remove papers from PCAS. Keep CAS-

specific content and add Yearbook content.specific content and add Yearbook content.

2.2. Create a yearly Membership Directory Create a yearly Membership Directory publication as a separate soft-cover publication as a separate soft-cover publication.publication.

3.3. Create a new journal where refereed Create a new journal where refereed papers will be published. The editor is Gary papers will be published. The editor is Gary Dean.Dean.

4.4. Encourage non-CAS members to publish in Encourage non-CAS members to publish in the new journalthe new journal; ; actively solicit articles actively solicit articles from around the world. from around the world.

Basic Education Basic Education InitiativesInitiatives

Validation by Educational Validation by Educational Experience:Experience: EconomicsEconomics FinanceFinance Applied StatsApplied Stats

Computer Based TestingComputer Based Testing Modeling WorkshopModeling Workshop FCAS EducationFCAS Education

CBT Implementation CBT Implementation for Exam 1for Exam 1

September 2005 – First administration September 2005 – First administration (paper/pencil backup for areas without (paper/pencil backup for areas without centers).centers).

February 2006 – Second administration February 2006 – Second administration 2006 - 4 CBT administrations total.2006 - 4 CBT administrations total. Immediate release of grades beginning Immediate release of grades beginning

in 2006.in 2006. Rollout to other exams in future years.Rollout to other exams in future years.

Modeling WorkshopModeling Workshop

Education in risk integration techniques is Education in risk integration techniques is consistent with Centennial Goal.consistent with Centennial Goal. DFA added to Syllabus in 2000.DFA added to Syllabus in 2000. DFA taken off Exam 8 in 2003 due to inability DFA taken off Exam 8 in 2003 due to inability

to test in a paper-and-pencil environment.to test in a paper-and-pencil environment. Modeling Workshop Task Force Modeling Workshop Task Force

established.established. Piloted a hands-on workshop experience.Piloted a hands-on workshop experience. Consider adding this as a future FCAS Consider adding this as a future FCAS

requirement and/or continuing education requirement and/or continuing education opportunity. opportunity.

FCAS EducationFCAS Education

Task force established in late 2004 Task force established in late 2004 to recommend “Learning Objectives” to recommend “Learning Objectives” for what it means to be an FCAS.for what it means to be an FCAS.

ConsiderationsConsiderations Perhaps reducing total number of Perhaps reducing total number of

exams by one (i.e., 8 exams plus VEE).exams by one (i.e., 8 exams plus VEE). Including a mandatory workshop (e.g., Including a mandatory workshop (e.g.,

DFA Modeling Workshop).DFA Modeling Workshop). Recommendations delivered to CAS Recommendations delivered to CAS

Board in November 2005.Board in November 2005.

FCAS EducationFCAS Education

Board Task Force on FCAS Education Board Task Force on FCAS Education formed in late 2005 to consider policy-level formed in late 2005 to consider policy-level issues.issues.

Task Force Report was focus of January Task Force Report was focus of January 2006 Board meeting, during which four 2006 Board meeting, during which four resolutions were passed:resolutions were passed: Prepare a White Paper.Prepare a White Paper. Board endorses use of electives in basic Board endorses use of electives in basic

education.education. Electives to be available post-Fellowship for CE.Electives to be available post-Fellowship for CE. Mastery of core topics must be demonstrated by Mastery of core topics must be demonstrated by

all candidates through rigorous methods.all candidates through rigorous methods.

Research Working Research Working PartiesParties

Research task forces.Research task forces. Process should result in quality Process should result in quality

work products.work products. Brings together the research Brings together the research

energy of individual researchers.energy of individual researchers. Proven to be effective for GIRO, Proven to be effective for GIRO,

the general insurance research the general insurance research organization of the Faculty and organization of the Faculty and Institute of Actuaries (UK).Institute of Actuaries (UK).

Research Working Research Working PartiesParties

2004-062004-06 Dynamic Risk Modeling Handbook Dynamic Risk Modeling Handbook Public-Access DFA Model Public-Access DFA Model Bornhuetter-Ferguson - Initial Bornhuetter-Ferguson - Initial

Expected LossesExpected Losses Tail FactorsTail Factors Risk Transfer TestingRisk Transfer Testing Data Management and Information Data Management and Information

Educational Materials Educational Materials Loss Simulation ModelLoss Simulation Model

2006 Calendar of 2006 Calendar of EventsEvents

ERM SymposiumERM SymposiumApril 23-26, ChicagoApril 23-26, Chicago

Spring MeetingSpring MeetingMay 7-10, Puerto RicoMay 7-10, Puerto Rico

Seminar on ReinsuranceSeminar on ReinsuranceJune 1-2, New York CityJune 1-2, New York City

CLRSCLRSSeptember 11-12, AtlantaSeptember 11-12, Atlanta

Seminar on Predictive ModelingSeminar on Predictive ModelingOctober 4-5, 2006, BostonOctober 4-5, 2006, Boston

Annual MeetingAnnual MeetingNovember 12-15, San FranciscoNovember 12-15, San Francisco

Image of the Actuary Image of the Actuary CampaignCampaign

Profession-wide campaign.Profession-wide campaign. Image Advisory Group, made up of members Image Advisory Group, made up of members

from each of the North American actuarial from each of the North American actuarial organizations, oversees campaign.organizations, oversees campaign.

www.imageoftheactuary.orgwww.imageoftheactuary.org// for more for more information.information.

I welcome your I welcome your input regarding . . .input regarding . . .

CAS Centennial Goal / ERM InitiativesCAS Centennial Goal / ERM Initiatives Governance Initiatives on 2006 BallotGovernance Initiatives on 2006 Ballot Task Force on Actuarial CredibilityTask Force on Actuarial Credibility Basic Education InitiativesBasic Education Initiatives Research and PublicationsResearch and Publications Continuing EducationContinuing Education International IssuesInternational Issues What’s On Your Mind?What’s On Your Mind? Questions?Questions?

Thank You!Thank You!