The Professionalism Education Committee often gets asked to clarify if the Code of Professional Conduct and the Actuarial Standards of Practices (ASOPs) apply to various scenarios. We have also received comments that the focus of these articles is generally focused on actuaries practicing in the United States. We plan to address some of these scenarios in a mini-series of articles here in Actuarial Review.
While the articles will be posing scenarios as they apply to credentialed actuaries, we feel that these could be the basis for leading practices for anyone doing work as an actuary whether or not they intend on becoming credentialed.
To make this truly a learning and professionalism experience, we want your feedback. You can send your comments and questions to firstname.lastname@example.org.
To start the series, we will address what we believe are the two most common scenarios for our readers:
- A U.S. actuary sitting in the U.S. and performing actuarial work intended for a client inside the U.S.
- A U.S. actuary sitting in the U.S. and performing actuarial work intended for a client in Canada, or a U.S. actuary sitting in Canada performing actuarial work intended for a client in the U.S.
Future articles will address U.S. actuaries working abroad, non-U.S. actuaries sitting in the U.S. and performing work intended for a client inside the U.S., and U.S. actuaries working in non-actuarial roles.
According to the CAS’s 2020 Annual Report,4 approximately 82% of CAS members reside in the United States. Between 2019 and 2020, we see that the geographic proportion of membership in the U.S. slightly shrank, shifting internationally to Canada and China. It is also the CAS’s mission to expand the recognition of the society internationally, as evidenced by the 20% of membership service expenses in communication and marketing, and an additional 18% of total expenses dedicated to international activities (see Table 1).
Before we dive into discussing the specific scenarios, let us explore some terms and definitions that are important to remember.
An individual who has been admitted to a class of membership to which the Code of Professional Conduct (the Code) applies by action of any organization having adopted the Code is an Actuary. Note that when the term “actuary” is used without being capitalized, it refers to any individual practicing as an actuary, regardless of organizational membership or classification; however, Actuary (capitalized) should only be used to describe an individual who has been admitted to a class of membership.
We also define a “U.S. Actuary” as an actuary that is credentialed and resides in the United States.
A principal is a client or employer of an Actuary. It is the person(s) or organization(s) for which actuarial services are provided. Some examples of principals are the manager of the project, the client that hired you or the regulator that reviews your filing.
An Actuarial Communication can include a written, electronic or oral communication issued by an Actuary with respect to Actuarial Services. Further, examples include an actuarial memo in an email, an expert witness statement given in court or a rate filing document.
Actuarial Services are professional services provided to a principal by an individual acting in the capacity of an actuary.
An organization that has been accepted for full membership in the International Actuarial Association or a standards-setting, counseling or discipline body to which authority has been delegated by such an organization is a Recognized Actuarial Organization. In the United States, the Casualty Actuarial Society and American Academy of Actuaries are both recognized actuarial organizations. There are also recognized actuarial organizations around the world, including:
- Canadian Institute of Actuaries (CIA)
- Institute and Faculty of Actuaries (U.K.)
- Colegio Nacional de Actuarios (Mexico)
- Conference of Consulting Actuaries (U.S.)
- China Association of Actuaries
- Actuarial Society of Hong Kong
- Singapore Actuarial Society
- Association Suisse des Actuaires
U.S. Actuary Performing Work Intended for a U.S. Principal
This is the most common scenario and is probably also what is most familiar to the majority of current members and candidates. The CAS follows the Code of Professional Conduct published by the American Academy of Actuaries (AAA). From the Code, Precept 2 states, “An Actuary shall perform Actuarial Services only when the Actuary is qualified to do so on the basis of basic and continuing education and experience, and only when the Actuary satisfies applicable qualification standards.” In the U.S., an Actuary follows the United States Qualification Standards (USQS) published by the AAA. U.S. Actuaries are held to USQS, the Code of Professional Conduct and Actuarial Standards of Practice, regardless of their membership status in the AAA. In addition, candidate members are also subject to a subset of precepts from the Code.5
AAA delegates the basic education requirements to the CAS (and other credentialing organizations), which include a series of exams, the Course on Professionalism and Validation by Educational Experience (VEE) requirements. One must meet all the basic education requirements before one is eligible to become a member and be considered meeting the basic education requirements.
An Actuary needs to have at least 30 hours of continuing education (CE) credit, of which at least 6 CEs must be organized, at least 3 CEs must be related to professionalism topics, and, at most, 3 CEs can be related to business skills. AAA also randomly audits 1% of active members each year. At the time of this article, the AAA is in the process of revising the USQS, and it is the responsibility of each actuary to assure they meet the requirements.
Lastly, on the experience requirement, an Actuary must have at least three years of responsible actuarial experience to make a statement of actuarial opinion. If an actuary does not meet this requirement, another qualified actuary should be co-signing the work that leads to a General Statement of Actuarial Opinion (SAO). Examples of General SAOs include loss reserve opinions, ratemaking opinions, expert testimony, supporting actuarial reports and rate filings.
If an Actuary is interested in issuing a Specific SAO, such as an actuarial opinion that will be used in a National Association of Insurance Commissioners P&C annual statement, the actuary must obtain 15 CEs on relevant education related to the Specific SAO. At least six hours of this specific CE must be organized. Actuaries must also meet the experience requirement where they are under the review of an actuary qualified to issue the same SAO. Further requirements will apply to the Actuary. First, the Actuary must have three years of experience under the review of another actuary who was qualified to issue the same SAO.
Cross-Canadian Border Work
There are two sides to the Canadian coin: 1) a Canadian actuary performing actuarial services for the U.S., and 2) a U.S. actuary performing actuarial services for Canada.
The Code Annotation 2-1 requires an Actuary to observe applicable qualification standards (QS) that have been promulgated by a Recognized Actuarial Organization (RAO) for the jurisdictions in which the Actuary renders Actuarial Services, and Annotation 3-1 states that an Actuary observe the applicable standards of practice (Standards) promulgated by that RAO.
This means that if you are doing work for Canada, you need to follow the Canadian QS and Standards and follow the U.S. QS and Standards for work in the U.S. regardless of where you sit! The Cross-Border Discipline Agreement, which is between the CIA and the U.S.-based organizations, states that the “residence or physical location of the actuary is irrelevant to the determination of whether the actuary has practiced in Mexico, the United States, or Canada.” The CIA Standards of Practice reiterate that the “work in Canada of a member of a professional actuarial organization is expected to conform to these Standards of Practice” where “work” is defined as “work that is commonly, but not necessarily exclusively, performed by actuaries in assessing, measuring, and evaluating risks and contingencies.”
This applies not only to the heavy-lifting work but also to the peer reviews or other material contributions made to the work.
So, what if your work is relied upon? If your work was relied upon in work for another jurisdiction, but your work was not created within that jurisdiction as an intended or anticipated user, then you would not be required to comply with the QS and Standards of that jurisdiction. It is best practice to document for which jurisdictions the work was intended.
The Canadian CE requirement is more stringent in most ways than the U.S. CE requirement. Over the course of two years, the CIA requires 80 hours of continuing professional development credits, with at least 30 as “guided” activities, and a core professionalism course.
Final Remark and Upcoming Discussions
In summary, if you are practicing in the U.S., the Actuary would follow the USQS and standards. If the work performed involved Canada, the Actuary would follow the Canadian QS and standards of practice.
In an upcoming issue of Actuarial Review, we will explore the application for an Actuary to practice in China, Bermuda and other countries. ●
Michael Speedling, ACAS, MAAA, CPCU, CRMA, is the internal audit director for Axis Capital. Kenneth Hsu, FCAS, CSPA, is a senior actuarial analyst for Uber Technologies.