Chapter 1: Actuarial Advice

Question 1

List public sector stakeholders that an actuary can advise

Answer 1

1. Central and local government departments
2. Central banks
3. Regulatory bodies

Question 2

List 12 stakeholders involved in a pension scheme

Answer 2

1. Members
2. Members’ dependents
3. Trustees
4. Shareholders of the sponsor
5. Directors of the sponsor
6. Employees of the sponsor (Who are not scheme members)
7. Auditors / accountants
8. Regulatory bodies
9. Government
10. Administrators
11. Investment fund managers
12. Creditors of the sponsor

Question 3

List 7 areas in which actuaries can provide advice to employers

Answer 3

1. Protection against financial loss arising from sickness or death.
2. Protection of assets
3. Provision of work related benefits that will attract and retain good quality staff
4. Meeting legislative requirements
5. Managing the costs of running the business
6. Quantification of surplus capital
7. Investment of surplus capital

Question 4

List 8 areas in which actuaries can provide advise to the board of directors of an insurance company

Answer 4

1. Meeting legislative requirements
2. Investment and management of assets
3. Managing liabilities
4. Determining provisions
5. Premium rating
6. Meeting policyholders’s reasonable expectations (PRE)
7. Good corporate governance
8. Reinsurance requirements

Question 5

List 4 areas in which actuaries can provide advice to the sponsor of a benefit scheme

Answer 5

1. Providing protection benefits that meet the needs of the members and their dependents
2. Providing retirement benefits that meet the needs of the members
3. Managing the cost of providing the benefits
4. Meeting legislative requirements

Question 6

List 4 areas in which actuaries can provide advise to the government

Answer 6

1. Setting legislation that impacts on the provision of financial products
2. Monitoring the adherence to the legislation
3. Funding benefit provision by the state
4. Monitoring the funding of benefit provision by the state

Question 7

List four sources an actuary can use to get information about a client

Answer 7

1. Company accounts
2. Other published information
3. Client’s website
4. Meetings and less formal discussions with the client, to help understand the client’s culture

Need to understand:

• their circumstances and objectives
• potential conflicts of interest
• attitude of client, in particular, appetite and culture

Question 8

What are the 3 different types of advice an actuary can give?

Answer 8

1. Factual - based on research of facts
2. Indicative - giving an opinion without fully investigating the issue, such as in response to a direct question
3. Recommendations - researched and modelled forecasts, alternative weighted, recommendations made consistent with requirements, work normally peer reviewed

Question 9

What are the aims of the TASs (Technical Actuarial Standard’s)

Answer 9

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.

Question 10

What is the definition of ‘materiality’ in the TASs

Answer 10

Something is material, if at the time the work is performed, the effect of a departure from the TAS requirement could INFLUENCE the DECISION to be taken by the users of the resulting actuarial information.

This means that a principal can be ignored if it is felt that its inclusion would not have a material effect on the decision

Question 11

What are the 4 drivers of Actuarial Quality

Answer 11

• Reliability and usefulness of actuarial methods (Models)
• Communication of actuarial information and advise (actuarial info and advice)
• Technical skills of actuaries and ethics and professionalism of actuaries (Technical)
• Working environment of actuaries and other factors outside their control (Environment)

Question 12

6 principles of the Actuaries’ code

Answer 12

integrity
competence and care
impartiality
compliance`
communication
speaking up (whistleblowing)

Question 13

Requirements to operate as a professional actuary

Answer 13

recognises 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)

Question 14

Possible clients whom actuaries can advise (private sector)

Answer 14

A
INSURANCE COMPANY:
- prospective policyholders

policyholders
board of directors
shareholders
creditors
auditors
BENEFIT SCHEMES:

members and their dependents
employers
trustees
sponsors
auditors of the sponsors
OTHER:

employees
investment fund managers
members of investment schemes
sponsors of capital projects
banks

Question 15

SAP vs APN

Answer 15

Standard Actuarial Practice is compulsory to follow and failure to do so may result in a disciplinary process

Actuarial Practice Notes are guidelines and any departures from it must be outlined