CAS UpdateCAS UpdateWhere We’ve Been, Where Where We’ve Been, Where We Are, and Where We’re We Are, and Where We’re

GoingGoingMeeting of the Casualty Actuaries of the

Southeast

September 23, 2004

Presented by :Robert F. Wolf, FCAS, MAAAMercer Oliver Wyman, Inc.312-930-0648 Officerwolf@mow.com

AgendaAgenda

Two Important Task Forces Two Important Task Forces

Task Force on ACAS VoteTask Force on ACAS Vote

Task Force on Classes of Task Force on Classes of MembershipMembership

Education InitiativesEducation Initiatives

Your InputYour Input

Two Important Two Important Task ForcesTask Forces

Task Force on the ACAS VoteTask Force on the ACAS Vote Should Associates have voting rights?Should Associates have voting rights?

All ACAS? After N Years as an ACAS?All ACAS? After N Years as an ACAS? Stand for election to the Board? Stand for election to the Board? Hold officer positions, e.g., Vice President?Hold officer positions, e.g., Vice President? Serve on and chair committees? Which ones?Serve on and chair committees? Which ones?

Task Force on Classes of MembershipTask Force on Classes of Membership How many classes should the CAS have?How many classes should the CAS have? How should these classes be defined?How should these classes be defined?

Historical Historical Perspective Perspective of Associatesof Associates Since 1914, two classes of membership.Since 1914, two classes of membership.

Associate/Fellow designations have Associate/Fellow designations have changed over the years:changed over the years: Initially, based on company responsibilities.Initially, based on company responsibilities. Beginning in 1915, based on exams:Beginning in 1915, based on exams:

Number and content of exams has varied.Number and content of exams has varied. Currently a two exam educational difference.Currently a two exam educational difference.

Currently little distinction between Currently little distinction between FCAS and ACAS in the ability to FCAS and ACAS in the ability to perform professional actuarial services.perform professional actuarial services.

Task Force on ACAS Task Force on ACAS VoteVote

Why are we considering this issue?Why are we considering this issue? Voting rights have not changed since Voting rights have not changed since

inception and represent a time when there inception and represent a time when there was a much clearer distinction between was a much clearer distinction between Fellows and Associates.Fellows and Associates.

A significant minority (25-30%) of A significant minority (25-30%) of Associates have stopped taking exams. We Associates have stopped taking exams. We need to recognize the career Associates.need to recognize the career Associates.

Lack of true representation for Associates, Lack of true representation for Associates, despite the fact that they pay full dues.despite the fact that they pay full dues.

Approval of Mutual Recognition.Approval of Mutual Recognition.

Task Force on ACAS Task Force on ACAS VoteVote

Right to voteRight to vote should be given to members upon should be given to members upon attainment of Fellowship or five years after they attainment of Fellowship or five years after they are recognized as Associates, whichever comes are recognized as Associates, whichever comes first. Right to vote should be unrestricted.first. Right to vote should be unrestricted.

All voting members should be allowed to stand for All voting members should be allowed to stand for election to the election to the Board of Directors.Board of Directors.

Voting Associates may hold all Voting Associates may hold all officer positionsofficer positions, , with the exception of:with the exception of: President / President ElectPresident / President Elect Vice President - Admissions Vice President - Admissions

Committee membership is to remain restricted to Committee membership is to remain restricted to Fellows for Discipline, Education Policy, Syllabus.Fellows for Discipline, Education Policy, Syllabus.

Task Force on Task Force on Classes of Classes of

MembershipMembershipWhy are we considering this issue?Why are we considering this issue? Current structure reflects a time when there Current structure reflects a time when there

was a much clearer distinction between FCAS was a much clearer distinction between FCAS and ACAS. and ACAS.

Educational differences do not restrict an ACAS Educational differences do not restrict an ACAS from completing assignments like those done by from completing assignments like those done by a FCAS.a FCAS.

Associate designation connotes lesser standing, Associate designation connotes lesser standing, even though the ACAS is fully qualified to sign even though the ACAS is fully qualified to sign statements of actuarial opinion.statements of actuarial opinion.

Two designations that each mean a fully Two designations that each mean a fully qualified actuary is confusing.qualified actuary is confusing.

CAS organizational structure has not been CAS organizational structure has not been widely adopted worldwide. widely adopted worldwide.

Task Force on Task Force on Classes of Classes of

MembershipMembershipThe Task Force recommended:The Task Force recommended: Only one class of membership - Fellow.Only one class of membership - Fellow. Certificate of Achievement in Casualty Actuarial Certificate of Achievement in Casualty Actuarial

Science.Science. All candidates under the Code of Professional All candidates under the Code of Professional

Conduct.Conduct. ACAS continue to be awarded for a limited time.ACAS continue to be awarded for a limited time. Existing ACAS’s awarded FCAS after completing Existing ACAS’s awarded FCAS after completing

exams or after five additional years have passed.exams or after five additional years have passed. Ideal number of exams for Fellowship is eight; Ideal number of exams for Fellowship is eight;

necessary material can be reorganized to fit.necessary material can be reorganized to fit.

Task Force on Task Force on Classes of Classes of

MembershipMembership In May 2004, the Board discussed the various In May 2004, the Board discussed the various

transition options in the Task Force Report.transition options in the Task Force Report. Options ranged fromOptions ranged from

Immediately granting FCAS to ACAS and Immediately granting FCAS to ACAS and discontinuing ACASdiscontinuing ACAS

Completion of additional requirementsCompletion of additional requirements Discontinuing ACAS after a transition period and Discontinuing ACAS after a transition period and

putting the ACAS into run-off.putting the ACAS into run-off. Under no circumstances would current Under no circumstances would current

Associates lose their status as members of the Associates lose their status as members of the CAS.CAS.

Task Force on Task Force on Classes of Classes of

MembershipMembership Additional information was requested for Additional information was requested for

the Board’s consideration during the the Board’s consideration during the discussion at September Board Meeting.discussion at September Board Meeting. Survey of the Membership Advisory Panel Survey of the Membership Advisory Panel

(MAP).(MAP). Feedback from Regional Affiliate Feedback from Regional Affiliate

Presentations.Presentations. Interviews with recruiters on the effects of one Interviews with recruiters on the effects of one

class of membership on attracting candidates.class of membership on attracting candidates. Feedback submitted by members.Feedback submitted by members.

Task Force on Task Force on Classes of Classes of

MembershipMembership Summary of additional feedback received:Summary of additional feedback received:

Over two-thirds (70%) of the MAP agreed Over two-thirds (70%) of the MAP agreed with TF recommendation of one class.with TF recommendation of one class.

More than three-fourths (77%) disagreed with More than three-fourths (77%) disagreed with the TF recommendation to grant all ACAS the the TF recommendation to grant all ACAS the FCAS designation without additional FCAS designation without additional requirements.requirements.

Most of the feedback has indicated that one Most of the feedback has indicated that one class of membership will not create a class of membership will not create a competitive disadvantage for students.competitive disadvantage for students.

Task Force on Task Force on Classes of Classes of

MembershipMembershipBoard Motions at September Board Meeting:Board Motions at September Board Meeting: That the Board instruct the Executive Council to That the Board instruct the Executive Council to

establish a TF to propose within the next year a set establish a TF to propose within the next year a set of learning objectives by which FCAS can be of learning objectives by which FCAS can be attained:attained: with less material than the current exams,with less material than the current exams, with fewer than the current 9 exams, with fewer than the current 9 exams, while meeting the requirements of the IAA,while meeting the requirements of the IAA, while being consistent with the Centennial Goal. while being consistent with the Centennial Goal.

It is the Board’s sense that this can be accomplished It is the Board’s sense that this can be accomplished with eight exams (or seven exams with a workshop with eight exams (or seven exams with a workshop or seminar).or seminar).

Task Force on Task Force on Classes of Classes of

MembershipMembershipBoard Motions at September Board Meeting:Board Motions at September Board Meeting: Inform the CAS membership of the foregoing Inform the CAS membership of the foregoing

action, with an indication that the Board supports action, with an indication that the Board supports a move to an eventual single class of credentialed a move to an eventual single class of credentialed membership, with no more new Associates, membership, with no more new Associates, concurrent with the movement to a shorter concurrent with the movement to a shorter syllabus; and will seek membership reaction to syllabus; and will seek membership reaction to this plan. (It is expected that the then-current this plan. (It is expected that the then-current Associates will either complete their remaining Associates will either complete their remaining exams and become Fellows, or remain Associates exams and become Fellows, or remain Associates until they cease their membership in the CAS.)until they cease their membership in the CAS.)

Membership Membership InvolvementInvolvement

Board is committed to obtaining member Board is committed to obtaining member input.input.

Granting voting rights requires an amendment Granting voting rights requires an amendment to the Constitution approved by Fellows, to the Constitution approved by Fellows, however, the Board agreed to postpone further however, the Board agreed to postpone further action on the ACAS Vote, pending resolution of action on the ACAS Vote, pending resolution of the Classes of Membership issue.the Classes of Membership issue.

Moving to one class of credentialed member Moving to one class of credentialed member may not require a change to the Constitution, may not require a change to the Constitution, but there will be a thorough exchange of ideas.but there will be a thorough exchange of ideas.

Changes to Changes to Preliminary Preliminary EducationEducation

CurrentCurrent Prerequisites: Linear Algebra and Statistics Prerequisites: Linear Algebra and Statistics Exam 1: Calculus and Probability (4 hours)Exam 1: Calculus and Probability (4 hours) Exam 2: Interest, Economics, Finance (4 Exam 2: Interest, Economics, Finance (4

hours)hours) Exam 3: Actuarial Models– NOT JOINT (4 Exam 3: Actuarial Models– NOT JOINT (4

hours)hours) Exam 4: Actuarial Modeling (including Exam 4: Actuarial Modeling (including

applied stats) (4 hours)applied stats) (4 hours)

Changes to Changes to Preliminary Preliminary EducationEducation

Approved March 2004 Board Approved March 2004 Board MeetingMeeting

Starting Spring 2005Starting Spring 2005 Prerequisites: Linear Algebra and CalculusPrerequisites: Linear Algebra and Calculus Exam 1: Probability with Calculus (3 hours)Exam 1: Probability with Calculus (3 hours) Exam 2: Interest (2 hours)Exam 2: Interest (2 hours) Exam 3: Actuarial Models & Statistics (4 Exam 3: Actuarial Models & Statistics (4

hours)hours) Exam 4: Actuarial Modeling (4 hours)Exam 4: Actuarial Modeling (4 hours) Verification by Educational Experience: Verification by Educational Experience:

Economics, Finance, Applied StatsEconomics, Finance, Applied Stats

Validation by Validation by Educational Educational ExperienceExperience

Option 1: Submit a course syllabus for approval, Option 1: Submit a course syllabus for approval, and then a grade of B- or better in the course.and then a grade of B- or better in the course. Micro and Macro EconomicsMicro and Macro Economics Intermediate Corporate FinanceIntermediate Corporate Finance Regression and Time Series (could be separate courses)Regression and Time Series (could be separate courses)

Option 2: Pass an acceptable exam, such as the AP Option 2: Pass an acceptable exam, such as the AP exams for Micro and Macroeconomics, CFA exams, exams for Micro and Macroeconomics, CFA exams, etc. etc.

Option 3: Pass college-level exams offered by the Option 3: Pass college-level exams offered by the CAS. CAS committed to offering these for at least 2 CAS. CAS committed to offering these for at least 2 years.years.

Option 4: Other experiences.Option 4: Other experiences. Courses/seminars designed specifically for VEE creditCourses/seminars designed specifically for VEE credit

TransitionTransition

2000 Syllabus2000 Syllabus Exam 1 Exam 1 Exam 1 Exam 1 Exam 2 Exam 2 Exam 2 + VEE for Econ & Finance Exam 2 + VEE for Econ & Finance Exam 3 Exam 3 Exam 3 Exam 3 Exam 4 Exam 4 Exam 4 + VEE for Applied Stats Exam 4 + VEE for Applied Stats

Pre-2000 SyllabusPre-2000 Syllabus Part 3A Part 3A VEE for Applied Stats VEE for Applied Stats Part 4A Part 4A Exam 2 Exam 2 Part 4B Part 4B Exam 4 Exam 4 Part 5A Part 5A VEE for Economics VEE for Economics Part 5B Part 5B VEE for Finance VEE for Finance

Why VEE?Why VEE? Most candidates take Econ and/or Finance Most candidates take Econ and/or Finance

No need to examine topics that require No need to examine topics that require background but not mastery.background but not mastery.

But verification is needed to meet international But verification is needed to meet international standards.standards.

Test questions for Applied Stats stress Test questions for Applied Stats stress memorization rather than application.memorization rather than application. Our candidates need to learn how to appropriately Our candidates need to learn how to appropriately

apply regression and time series models to real apply regression and time series models to real data.data.

This competency cannot easily be validated in a This competency cannot easily be validated in a timed paper-and-pencil exam.timed paper-and-pencil exam.

Impact on Travel Impact on Travel TimeTime

Actuarial Science majors currently Actuarial Science majors currently graduate with exams.graduate with exams. Unlikely to have much effect on these Unlikely to have much effect on these

candidates.candidates. Other majors who take VEE courses in Other majors who take VEE courses in

school benefit from learning experience.school benefit from learning experience. Candidates who did not have VEE courses Candidates who did not have VEE courses

in school:in school: Can tackle VEE while studying for Interest exam.Can tackle VEE while studying for Interest exam. Or between exam “seasons.”Or between exam “seasons.” VEE pass rates on first attempt should be very high.VEE pass rates on first attempt should be very high.

Other Ways to Other Ways to Reduce Travel TimeReduce Travel Time

Computer Based TestingComputer Based Testing Targeting 2005 pilot for Exam 1.Targeting 2005 pilot for Exam 1. Expand to 4-6 computer-based Expand to 4-6 computer-based

administrations in 2006.administrations in 2006. Candidate will receive results Candidate will receive results

immediately (beginning in 2006).immediately (beginning in 2006). Will expand to other exams if Will expand to other exams if

successful.successful. Approved at May 2004 Board Approved at May 2004 Board

Meeting. Awaiting approval by SOA.Meeting. Awaiting approval by SOA.

Other Ways to Other Ways to Reduce Travel TimeReduce Travel Time

More Efficient Study MaterialMore Efficient Study Material Too much material not written for study Too much material not written for study

purposes.purposes. Institute of Actuaries (UK) hired one vendor Institute of Actuaries (UK) hired one vendor

to produce all study material.to produce all study material. Material written specifically for study Material written specifically for study

purposes.purposes. Enabled increased pass rates despite Enabled increased pass rates despite

expanded syllabus breadth.expanded syllabus breadth. CAS Task Force determined that this CAS Task Force determined that this

approach could work for us.approach could work for us. Syllabus Committee charged with Syllabus Committee charged with

implementing.implementing. Targeting 2005 pilot for Exam 1.Targeting 2005 pilot for Exam 1.

Education Education ConsultantConsultant

Hired Education Consultant to help:Hired Education Consultant to help: Construct appropriate learning objectives.Construct appropriate learning objectives. Train to develop good thinking questions.Train to develop good thinking questions. Help with methods for setting pass score.Help with methods for setting pass score. Provide input on evaluating exam length Provide input on evaluating exam length

and difficulty.and difficulty. CAS Policy: Pass marks reflect CAS Policy: Pass marks reflect

sufficient grasp of material. No sufficient grasp of material. No predetermined pass mark.predetermined pass mark.

Modeling WorkshopModeling Workshop

Education in risk integration techniques is Education in risk integration techniques is consistent with Centennial Goal.consistent with Centennial Goal. DFA added to Syllabus in 2000.DFA added to Syllabus in 2000. DFA taken off Part 8 in 2003 due to inability to DFA taken off Part 8 in 2003 due to inability to

test in a paper-and-pencil environment.test in a paper-and-pencil environment. Modeling Workshop Task Force established.Modeling Workshop Task Force established.

Pilot a hands-on workshop experience in late Pilot a hands-on workshop experience in late 2004.2004.

Consider adding this as a future FCAS Consider adding this as a future FCAS requirement and/or continuing education requirement and/or continuing education opportunity. opportunity.

I welcome your I welcome your input regarding . . .input regarding . . .

ACAS Task ForcesACAS Task Forces Education InitiativesEducation Initiatives CAS Centennial GoalCAS Centennial Goal International IssuesInternational Issues CAS Role Outside Traditional P/C InsuranceCAS Role Outside Traditional P/C Insurance MembershipMembership Research and PublicationsResearch and Publications What’s On Your Mind?What’s On Your Mind? Questions?Questions?

Thank You!Thank You!

Robert F. Wolf, FCAS, MAAAMercer Oliver Wyman, Inc.312-930-0648 Officerwolf@mow.com

Member of the CAS Board of Directors