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Frederick W. Kilbourne, ChairmanCritical Review of the U.S. Actuarial Profession (CRUSAP)

What is CRUSAP and Why Was It Undertaken?

- Critical Review of the U.S. Actuarial Profession

- Catalyzed by the Sir Derek Morris Review of the UK Actuarial Profession

- Perceived Need to Determine Whether the Actuarial Needs of the Public Are Being Met

What is CRUSAP and Why Was It Undertaken? (continued)

Evidence of the Perceived Need:

- Globalization

- U.S. Accounting Malfeasance

- Shifts in the Nature of Retirement Plans

- Changes in the Financing of Health Insurance

- Emergence of New Fields of Practice for Actuaries

When was CRUSAP Begun and by Whom?

- A Presidential Task Force of the American Academy of Actuaries

- Established at the May 2005 Meeting of the Board of Directors

- The Academy Board of Directors Includes the Academy President and President-Elect, and Presidents and Presidents-Elect of the other Four U.S.-based Actuarial Organizations:

- American Society of Pension Professionals and Actuaries (ASPPA)

- Casualty Actuarial Society (CAS)

- Conference of Consulting Actuaries (CCA)

- Society of Actuaries (SOA)

What Was Included in the CRUSAP Scope?

- Actuarial Needs of the Public (with the definitions of each of the three terms an important component of the CRUSAP study process)

- Education and Training (including the qualifications process)

- Ethics and Professionalism (the professional code, the Actuarial Standards Board (ASB), and more)

What Was Included in the CRUSAP Scope? (cont.)

- Oversight and Regulation (internal and external, the Actuarial Board for Counseling and Discipline (ABCD), and more)

- Actuarial Communications (conveying uncertainty without undermining confidence)

- Structure of the Actuarial Profession (Are we right or wrong in the United States to have multiple

organizations?)

Who Bore the Responsibility for CRUSAP Work?

- Task Force of Seven Actuaries:Fred Kilbourne, ChairmanBob CollettKen KentGuy KingJim RechJack TurnquistTerri Vaughan

- All are members of the Academy and SOA. Some are members of ASPPA, CAS, and CCA.

- Members include five past or present presidents of national actuarial organizations.

- Several members are consultants, one is an educator, and another is a former government actuary.

Who Bore Responsibility for CRUSAP Work? (continued)

- The Executive Director of the Academy, Kevin Cronin, was actively involved with the Task Force.

- A Full-time Project Manager, Mindy Reiser, was engaged for the duration of CRUSAP.

The CRUSAP Advisory Panel

- Thirty individuals, 26 men and four women, served as advisors to the Task Force.

- Twelve, 40 percent, of these are not actuaries (see next slide).

- Practice Areas of the Actuaries on the Advisory Panel:- Casualty (4)- Pension (4)- Life (1)- Health (2)- Social Insurance (3)- Investment (1)- Professors of Actuarial Science (3)

The CRUSAP Advisory Panel

(continued)

- Professional Backgrounds of the Non-Actuaries on the Panel:

- Deputy Commissioner, U.S. Social Security Administration

- State Insurance Commissioner

- Head of a Public Retirement System

- Vice President, Health Policy/Government Affairs, Major U.S. Corporation.

- Executive Director, a Private Health Alliance

- Professional Backgrounds of the Non-Actuaries on the Advisory Panel (continued):

- Health Economist

- Attorney, Specializes in Defense of Actuaries

- President, Financial Services Subsidiary of a Major Insurer

- Senior Financial Services Markets Specialist for a Federal Reserve Bank

- Two Professors of Insurance and Risk Management

- Chief Regulator of UK Actuaries (due to the Morris Review)

The CRUSAP Advisory Panel

(continued)

The CRUSAP Report

For each the areas within the report scope, one Task Force member had primary responsibility, with a second member serving as initial

reviewer and critic. The responsibilities were as follows:

- Bob Collett – Lead analyst for Actuarial Needs of the Public (Section I), seconded by Guy King

- Jim Rech – Lead analyst for Education and Training (Section II), seconded by Terri Vaughan

- Ken Kent – Lead analyst for Ethics and Professionalism (Section III), seconded by Jack Turnquist

The CRUSAP Report (continued)

-Terri Vaughan – Lead analyst for Oversight and Regulation (Section IV), seconded by Ken Kent

- Jack Turnquist – Lead analyst for Actuarial Communications (Section V), seconded by Jim Rech

- Guy King – Lead analyst for Structure of the Profession (Section VI), seconded by Bob Collett

- Fred Kilbourne - Prepared the Executive Summary and, along with the Project Manager, served as editor.

The CRUSAP RecommendationsPreamble

- CRUSAP goal: to identify the actuarial needs of the public, determine whether those needs are being met, and propose action to meet any unmet, or undermet, needs.

- Definitions:

-Public

-Actuarial needs

-Actuary

- How to accomplish the goal.

I. Actuarial Needs of the Public

1. Define actuarial science as “the quantification, analysis, and management of future contingent risk and its financial consequences”.

2. In order to meet all the anticipated needs of the public, make a home somewhere within the actuarial profession for all persons doing competent actuarial work.

3. Encourage individual actuaries to gain sufficient knowledge to speak out on actuarial elements of major public issues.

II. Education and Training

4. Increase the use of alternative delivery systems to educate and examine prospective actuaries.

5. Require active members of the actuarial profession to meet consistent continuing education requirements.

6. Define the actuarial value proposition by the board of directors of each actuarial professional organization.

III. Ethics and Professionalism

7. Promote profession-wide discussion of actuarial ethics as set forth in Precept 1 of the Code of Professional Conduct.

8. Sponsor research to enhance the ability of the profession to meet the actuarial needs of the public.

9. Continue to promote the development and establishment of Actuarial Standards of Practice appropriate for the emerging principles-based regulatory environment.

IV. Oversight and Regulation

10.Enhance the ability of the ABCD to identify possible violations of the Code of Professional Conduct.

11.Establish a joint disciplinary process for the profession, independent of the individual actuarial organizations.

12.Benchmark disciplinary processes for U.S. actuaries against those of other U.S. professions and of actuaries in other countries.

13.Provide for participation in the standards and discipline process by professionals who are not actuaries.

V. Actuarial Communication

14.Require training and demonstrated proficiency in communications skills as part of the basic education and qualification of actuaries.

15.Develop a website specifically directed at the users of actuarial services and the general public.

16.Retain a firm specializing in professional organization communications to perform a study of the current communications activities of the U.S. based actuarial professional organizations.

VI. Structure of the Profession

17.Establish a group (task force, committee, team) specifically charged with reviewing and implementing, where feasible, the recommendations in this report.

18.Establish a broad-based independent group (task force, committee, convention) charged with reviewing the actions and advising the group proposed in the preceding recommendations.

19.Establish consolidation of the U.S. actuarial profession as a goal of the profession.

What did we hope to Accomplish?

• Report Acceptance (based on supported conclusions, feasible recommendations)

• Endorsement of the Recommendations (by the actuarial organizations)

• Success by the Profession (in identifying and meeting the actuarial needs of the public)