Chapter 0 - Actuarial Control Cycle

Question 1

Five nodes of ACC

Answer 1

General economic and commercial environment
Specifying the problem
Developing the solution
Monitoring
Professional

Question 2

General economic and commercial environment (ACC)

Answer 2

FABER
Financial products and customer needs
Asset Classes
Behaviour of the markets
External environment
Regulation

Question 3

Specifying the problem (ACC)

Answer 3

Risk
Contract Design
Capital requirements

Question 4

Developing solution (ACC)

Answer 4

PRISM CARD
Pricing and financing strategies
Risk management
Investment management and strategy
Surplus management
Modelling
Capital management
Assumption setting
Reporting of results
Data

Question 5

Monitoring and Professionalism(ACC)

Answer 5

Monitoring
Surplus

Actuarial Advice

Question 6

What makes the actuarial control a ‘control cycle’?

Answer 6

Usually includes all phases
Two-way arrow indicates there is a cyclical pattern and inter-relationship between all the element
Feedback is not automatic and requires actuary to exercise judgement

Question 7

What makes the actuarial control cycle ‘actuarial’?

Answer 7

CLAUSE DUMAU
Considers all the stakeholders requirement/risk profile
Long-term instead of short-term horizon
Application of actuarial judgement
Use of models to represent future financial outcomes
Setting assumptions using historical data
Estimation of the financial impact of uncertain events

Decisions need to be made now about likely future outcome
Use modelling results to enforce practical strategies
Monitoring and periodically analysing emerging expereince
Allowing forgeneral business environment with factors such as tax and regulation
Using emerging experience to modify models and strategies

Question 8

What does the general economic and commercial environment do?

Answer 8

Sets the scene for environment in which problem is being solved and impact of environment on decision making

Question 9

What occurs in the specifying the problem stage?

Answer 9

• Identify and analyse the risks of the various stakeholders in detail
• Set out clearly the problem from the point of view of each stakeholder.
• Provides assessment of risks faced and how to manage, mitigate or transfer said risks.
• This should reflect the risk appetite of the individual/entity.
• Provide an analysis of the options for the design of solutions

Question 10

What occurs in the developing the solution stage?

Answer 10

• Examination of current actuarial models in use and how they can be adjusted for the particular problem at hand.
• Choosing most appropriate model for problem or creating a new one
• Selection of the assumption to be used in the model.
• Interpretation of the results of the modelling process
• Consideration of the implications of results on the overall problem
• Consideration of the implications of the results for all stakeholders
• Determining a proposed solution to the problem
• Consideration of alternative solutions and their effects on the problem
• Formalising a proposal
• Communication proposal/alternatives to stakeholders responsible for decision making

Question 11

What occurs in the monitoring the experience stage?

Answer 11

• This stage involves monitoring of experience and feeding back into problem specification and solution development stages of ACC.
• Allows us to compare what is assumed to what has happened.
• Enables us to identify the causes of any departures from the goal