Current CAS Issues Current CAS Issues and Directionsand DirectionsOakley E. (Lee) Van Slyke, FCAS

Casualty Actuaries of the Southeast

April 12, 2005 Nashville, TN

AgendaAgenda CAS Centennial GoalCAS Centennial Goal

ERM InitiativesERM Initiatives

2004 Task Force Reports on ACAS Vote 2004 Task Force Reports on ACAS Vote and Classes of Membershipand Classes of Membership

Basic Education InitiativesBasic Education Initiatives

Research Working PartiesResearch Working Parties

Continuing EducationContinuing Education

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Your InputYour Input

CAS Centennial GoalCAS Centennial Goal

The CAS will be The CAS will be globallyglobally recognized as recognized as the preeminent resource in educating the preeminent resource in educating casualty actuaries and conducting casualty actuaries and conducting research in casualty actuarial science. research in casualty actuarial science. CAS members will be recognized as the CAS members will be recognized as the leading experts in the evaluation of leading experts in the evaluation of hazard risk and the hazard risk and the integrationintegration of of hazard risk with strategic, financial and hazard risk with strategic, financial and operational risk.operational risk.

Implementing the Implementing the Centennial GoalCentennial Goal

Centennial Goal Implementation Task ForceCentennial Goal Implementation Task Force Subcommittee of Long Range Planning Subcommittee of Long Range Planning

CommitteeCommittee Working with Vice Presidents and Committee Working with Vice Presidents and Committee

Chairs in setting goals.Chairs in setting goals. How does my committee and its goals support How does my committee and its goals support

the Centennial Goal?the Centennial Goal? SAM GoalsSAM Goals

SSignificant, ignificant, AAttainable, ttainable, MMeasurableeasurable Interim milestones to help gauge progress Interim milestones to help gauge progress

towards the Centennial Goal.towards the Centennial Goal.

ERM InitiativesERM Initiatives

During its March 2-3, 2005 meeting, the During its March 2-3, 2005 meeting, the CAS Board took actions to help the CAS Board took actions to help the actuarial profession benefit from new actuarial profession benefit from new opportunities in Enterprise Risk opportunities in Enterprise Risk Management (ERM)Management (ERM) Approved Joint CAS/SOA Risk Management Approved Joint CAS/SOA Risk Management

Section.Section. Launched partnership with Enterprise Risk Launched partnership with Enterprise Risk

Management Institute International, Ltd. Management Institute International, Ltd. (ERMII). (ERMII).

Created new Vice President position to oversee Created new Vice President position to oversee ERM-related activities.ERM-related activities.

Risk Management Risk Management SectionSection

Similar to the existing CAS special Similar to the existing CAS special interest sections CARe and AIR.interest sections CARe and AIR.

Both CAS and SOA members are eligible Both CAS and SOA members are eligible to serve on the Council that guides the to serve on the Council that guides the activities of the Section. John J. Kollar is activities of the Section. John J. Kollar is currently serving as CAS representative; currently serving as CAS representative; others will be added.others will be added.

Members who are interested in risk Members who are interested in risk management are encouraged to join the management are encouraged to join the Section. Annual dues are only $20.Section. Annual dues are only $20.

Other ERM Other ERM InitiativesInitiatives

ERMII is a private, not-for-profit, ERMII is a private, not-for-profit, independent educational and research independent educational and research organization led by CAS Fellow Shaun organization led by CAS Fellow Shaun Wang.Wang.

ERMII is co-sponsored by an ERMII is co-sponsored by an international group of universities and international group of universities and professional organizations including professional organizations including Georgia State University, University of Georgia State University, University of New South Wales, University of Illinois, New South Wales, University of Illinois, Wuhan University (China), and the CAS.Wuhan University (China), and the CAS.

New VP to oversee and coordinate ERM-New VP to oversee and coordinate ERM-related activities. related activities.

2004 Task Force 2004 Task Force ReportsReports

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?

Board Findings on Board Findings on ACAS VoteACAS Vote

Right to voteRight to vote should be granted upon earlier of: should be granted upon earlier of: Fellowship or five years after Associateship. Fellowship or five years after Associateship. Right to vote should be unrestricted.Right to vote should be unrestricted.

All voting members should be allowed to stand All voting members should be allowed to stand for election to the for 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 Committee membership is to remain restricted to Fellows for Discipline, Education Policy, to Fellows for Discipline, Education Policy, Syllabus, Fellowship Exam Committees.Syllabus, Fellowship Exam Committees.

Board Findings onBoard Findings onClasses of Classes of

MembershipMembershipBoard Motions at September 2004 Board Meeting:Board Motions at September 2004 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 of establish a TF to propose within the next year a set of learning objectives by which FCAS can be attained:learning objectives by which FCAS can be 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 or with eight exams (or seven exams with a workshop or seminar).seminar).

Board Findings on Board Findings 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

Pre-2005 Structure (joint with SOA)Pre-2005 Structure (joint with SOA) 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

Starting Spring 2005 (joint with SOA)Starting Spring 2005 (joint with SOA) Prerequisites: Linear Algebra and Prerequisites: Linear Algebra and

CalculusCalculus Validation by Educational Experience: Validation by Educational Experience:

Economics, Finance, Applied StatsEconomics, Finance, Applied Stats Exam 1: Probability with Calculus (3 Exam 1: Probability with Calculus (3

hours)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)

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

Finance during university study.Finance during university study. 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. Exam questions for Applied Stats stress Exam 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.

Validation by Validation by Educational Educational ExperienceExperience Option 1Option 1: Submit a course syllabus for approval, : 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 Economics (could be separate courses)Micro and Macro Economics (could be separate courses) Intermediate Corporate FinanceIntermediate Corporate Finance Regression and Time Series (could be separate courses)Regression and Time Series (could be separate courses)

Option 2Option 2: Pass an acceptable exam, such as the AP : 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 3Option 3: Pass college-level exams offered by the : Pass college-level exams offered by the CAS.CAS. CAS committed to offering these for at least 2 years.CAS committed to offering these for at least 2 years.

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

Impact on Impact on CandidatesCandidates

Actuarial Science majors Actuarial Science majors Currently take both exams and appropriate courses.Currently take both exams and appropriate courses. These candidates will graduate in the same position.These candidates will graduate in the same position.

Other majorsOther majors Taking college VEE courses will enhance training.Taking college VEE courses will enhance training. Travel time will be unaffected. Travel time will be unaffected.

Graduates without college VEE courses can:Graduates without college VEE courses can: Take VEE while studying for (short) Interest exam.Take VEE while studying for (short) Interest exam. Study for VEE between exam “seasons.”Study for VEE between exam “seasons.” VEE course first-time pass rates should be very VEE course first-time pass rates should be very

high.high.

Computer Based Computer Based TestingTesting

Candidates take exam at a standardized Candidates take exam at a standardized testing center.testing center.

Can schedule exam any time during a Can schedule exam any time during a specified period (e.g. one week).specified period (e.g. one week).

Software tutorial provided online and Software tutorial provided online and before exam begins (e.g. 3 ½ hour exam before exam begins (e.g. 3 ½ hour exam appointment includes ½ hour for setup appointment includes ½ hour for setup and tutorial).and tutorial).

User friendly software with easy User friendly software with easy navigation.navigation.

Potential for immediate grading.Potential for immediate grading.

CBT Implementation CBT Implementation for Exam 1for Exam 1

May 2005 - standard paper and pencil May 2005 - standard paper and pencil exam.exam.

September 2005 - CBT (possible paper September 2005 - CBT (possible paper and pencil backup without access to CBT and pencil backup without access to CBT centers).centers).

November 2005 - no exam.November 2005 - no exam. 2006 - 4 to 6 CBT administrations.2006 - 4 to 6 CBT administrations. Immediate release of grades beginning Immediate release of grades beginning

some time in 2006.some time in 2006. Rollout to other exams in future years.Rollout to other exams in future years.

Code of Professional Code of Professional ConductConduct

Beginning in 2006, candidates taking Beginning in 2006, candidates taking CAS Exams 3, and 5-9 will be required to CAS Exams 3, and 5-9 will be required to agree to abide by the terms and agree to abide by the terms and conditions of the CAS Code of conditions of the CAS Code of Professional Conduct.Professional Conduct.

Recognizes that candidates who have not Recognizes that candidates who have not yet achieved Associateship perform yet achieved Associateship perform responsible actuarial work and that this responsible actuarial work and that this work should be done within the work should be done within the framework of the Code.framework of the Code.

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 Modeling Workshop Task Force

established.established. Piloting a hands-on workshop experience, with Piloting a hands-on workshop experience, with

the final pilot being conducted with new the final pilot being conducted with new Fellows in May.Fellows in May.

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.

FCAS EducationFCAS Education

Task force established in late 2004 to Task force established in late 2004 to review Exams 5-9review Exams 5-9

Goal is to reduce total number of exams Goal is to reduce total number of exams by one (i.e., 8 exams plus VEE)by one (i.e., 8 exams plus VEE)

May include a mandatory workshop May include a mandatory workshop (e.g., case studies on risk integration (e.g., case studies on risk integration modeling)modeling)

Recommendations due to CAS Board in Recommendations due to CAS Board in September 2005September 2005

Research Working Research Working PartiesParties

Research task forces charged to produce a Research task forces charged to produce a research product over a short timeframe. research product over a short timeframe.

Should produce more cohesive, accessible Should produce more cohesive, accessible material in a consistent format, through the material in a consistent format, through the collective, managed nature of the process. collective, managed nature of the process.

Should help the CAS effectively address Should help the CAS effectively address long-standing research problems, and long-standing research problems, and harness the research energy of individual harness the research energy of individual researchers.researchers.

Have proven to be effective research Have proven to be effective research mechanisms for GIRO, the general mechanisms for GIRO, the general insurance research organization of the insurance research organization of the Faculty and Institute of Actuaries (UK).Faculty and Institute of Actuaries (UK).

Research Working Research Working PartiesParties

2003-042003-04 Correlations and Dependencies Correlations and Dependencies

Among All Risk Sources Among All Risk Sources Executive-Level Decision-Making Executive-Level Decision-Making

Using Dynamic Risk ModelingUsing Dynamic Risk Modeling Elicitation and Elucidation of Risk Elicitation and Elucidation of Risk

Preferences Preferences Quantifying Variability in Reserves Quantifying Variability in Reserves

Estimates Estimates

Research Working Research Working PartiesParties

2004-052004-05 Dynamic Risk Modeling Handbook Dynamic Risk Modeling Handbook Public-Access DFA Model Public-Access DFA Model Bornhuetter-Ferguson - Initial Bornhuetter-Ferguson - Initial

Expected LossesExpected Losses Tail FactorsTail Factors

Continuing Continuing EducationEducation

AAA Exposure Draft recommends that the AAA Exposure Draft recommends that the Qualification Standards apply to all Qualification Standards apply to all “statements of actuarial opinion” defined as “statements of actuarial opinion” defined as follows:follows:

… … an opinion expressed by an actuary based upon an opinion expressed by an actuary based upon actuarial considerations, and intended by the actuarial considerations, and intended by the actuary to be relied upon by the outside person or actuary to be relied upon by the outside person or organization to whom the opinion is addressed. The organization to whom the opinion is addressed. The phrase “outside” person or organization refers to phrase “outside” person or organization refers to persons or organizations other than the actuary’s persons or organizations other than the actuary’s direct employer.direct employer.

A statement of actuarial opinion, although A statement of actuarial opinion, although usually conveyed in writing, may also be usually conveyed in writing, may also be conveyed orally.conveyed orally.

2005 Calendar of 2005 Calendar of EventsEvents

ERM SymposiumERM SymposiumMay 1-3, 2005, Chicago, IL May 1-3, 2005, Chicago, IL

CAS Spring MeetingCAS Spring MeetingMay 15-18, 2005, Phoenix, AZMay 15-18, 2005, Phoenix, AZ

Seminar on ReinsuranceSeminar on ReinsuranceJune 6-7, 2005, Hamilton, BermudaJune 6-7, 2005, Hamilton, Bermuda

Casualty Loss Reserve SeminarCasualty Loss Reserve SeminarSeptember 12-13, 2005, Boston, MASeptember 12-13, 2005, Boston, MA

Special Interest Seminar on Predictive Special Interest Seminar on Predictive Modeling September 19-20, 2005, Modeling September 19-20, 2005, Chicago, ILChicago, IL

CAS Annual MeetingCAS Annual MeetingNovember 13-16, 2005, Baltimore, MDNovember 13-16, 2005, Baltimore, MD

Image of the Actuary Image of the Actuary CampaignCampaign

Profession-wide campaign.Profession-wide campaign. Image Advisory Group, made up of members from Image Advisory Group, made up of members from

each of the North American actuarial organizations, each of the North American actuarial organizations, oversees campaign.oversees campaign.

Campaign kick-off CD ROM sent to all actuaries.Campaign kick-off CD ROM sent to all actuaries. www.imageoftheactuary.org/www.imageoftheactuary.org/ for more information. for more information.

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

CAS Centennial GoalCAS Centennial Goal ACAS Task ForcesACAS Task Forces Basic Education InitiativesBasic Education Initiatives Research and PublicationsResearch and Publications Continuing EducationContinuing Education International IssuesInternational Issues CAS Role Outside Traditional P/C CAS Role Outside Traditional P/C

InsuranceInsurance What’s On Your Mind?What’s On Your Mind? Questions?Questions?

Thank You!Thank You!