Actuarial Control Cycle

Question 1

What are the 5 components in the Actuarial Control Cycle?

Answer 1

specify Problem
develop Solution
Monitor the experience
Professionalism
general commercial and economic Environment

Question 2

Specifying the problem

Answer 2

• set Objective
• identify and analyse Risks
• initial suggestion of Dealing with risks
• consider viewpoint of all Stakeholders

Question 3

Developing the solution

Answer 3

• consider new and existing Models and choosing the most appropriate
• make Assumptions
• interpret model Results
• consider from perspectives of all Stakeholders
• determine Solution and Alternatives
• formalise Proposal

Question 4

Stakeholders

Answer 4

--Management
(board of directors, trustees, sponsoring company)
--Employees
--Recipients of the products
(policyholders, members, dependents)
--Regulators
--Investors
(shareholders, policyholders, sponsors)
--Competitors
--Government
--Financial institutions
(reinsurers, bank, consultants)
--Debtors/Creditors

Question 5

Process of monitoring

Answer 5

-Group data into homogenous groups
-Identify patterns in data +differences between actual and expected results
-use results to Revise models and assumptions
(based on PPP)
(+ use revised information to control the situation feedback into the cycle)

Question 6

Considerations for the homogeneous groups

Answer 6

-Volume of data
(credible vs homogeneous)
-potential Changes in the make up of the group
(heterogeneity within) 
-group's Risk factors

Question 7

Data patterns

Answer 7

• Trends
• Cycles
• Anomalies
• Random variation

Question 8

Considerations when revising models/assumptions

Answer 8

-Purpose
-Patterns
-divergence from Past
(potentially different groups moving forwards)

Question 9

Role of the government

Answer 9

-direct Provision of benefits
-Education about importance of benefits
-Regulation
(compelling/encouraging provision + security)
-investment Vehicles
(and instruments)

Question 10

Professionalism

Answer 10

-Professional conduct standards
-Ethical and Technical actuarial standards
-consider from perspective of all Stakeholders (protect public interest)
-recognising Others have valid views
-hold no Conflicts of interest
-Communicate well
-achieve, demonstrate, maintain and improve Competence
-act with another Integrity
-build trusting Relationship with client
-act Reliably
(quality, detail, and timeliness)
-take Responsibility for actions

Question 11

External Environment

Answer 11

• Competition and underwriting cycle
• Regulation and legislation
• Environmental (&ethical) issues
• Accounting standards
• Tax
• Economic outlook
• Governance
• Risk management requirements
• Experience from overseas
• Adequacy of capital
• Trends (demographic)
• Lifestyle considerations
• Institutional structure
• Social trends
• Technology
• State