Ch 1: Actuarial Advice

Question 1

Possible clients whom actuaries can advise (private sector

Answer 1

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 2

List public sector stakeholders that an actuary can advise

Answer 2

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

Question 3

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

Answer 3

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 4

List 6 areas in which actuaries can provide advice to prospectice policyholders

Answer 4

• personal protection against death and illness
• protection of property
• investment.

Other examples are: ·
* retirement planning
* protection against requiring long-term home or nursing care
* protection against personal liability claims (e.g. for causing a motor accident)

Question 5

List 7 areas in which actuaries can provide advice to employers

Answer 5

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 6

List 12 stakeholders involved in a pension scheme

Answer 6

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 7

List 3 areas actuaries can advise Trustees of benfit schemes

Answer 7

• managing the assets of the scheme
• paying the benefits promised under the scheme as they fall due
• maintaining solvency.

Question 8

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

Answer 8

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 9

List 3 areas actuaries can advise Employees

Answer 9

• provision of protection benefits on death or sickness
• provision of pension benefits on retirement
• investment of surplus personal funds.

Question 10

Sponsors of Capital Projects

Answer 10

• assessment of the risks underlying the project
• consideration of potential risk mitigation techniques
• evaluation of the future cashflows.

Question 11

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

Answer 11

1. Setting legislation that impacts on the provision of financial products, schemes, contracts and transactions that provide benefits on future financial events
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 12

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

Answer 12

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

Question 13

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

Answer 13

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 modeled forecasts, alternative weighted, recommendations made consistent with requirements, work normally peer reviewed

Question 14

5 principles of the Actuaries’code

Answer 14

• integrity
• competence and care
• impartiality
• compliance
• speaking up
• communication

Question 15

What are the aims of the TASs

Answer 15

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 16

What is the definition of ‘materiality’ in the TASs

Answer 16

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 17

What are the 4 drivers of Actuarial Quality

Answer 17

1. Reliability and usefulness of actuarial methods
2. Communication of actuarial information and advise
3. Technical skills of actuaries and ethics and professionalism of actuaries
4. Working environment of actuaries and other factors outside their control

Question 18

Requirements to operate as a professional actuary

Answer 18

• 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)