Key Characteristics of the Actuarial Leader Richard Fein, Ph D, FCAS, MAAA CAGNY Meeting June 2010 RIF Consulting, LLC Richard Fein, Ph D, FCAS, MAAA CAGNY Meeting June 2010 RIF Consulting, LLC

The Actuary as Leader Agenda Goals Characteristics of Teams of Professionals Guiding Principles Expectations of Stakeholders Characteristics of Leaders of Pros – Chief Actuary The Rubber Meets the Road Conclusion

Characteristics of Professional Teams Working with Professionals Many discussions and characterizations are available Good site: Bob Kizlik reference on my site Self motivated to learn profession Takes on responsibilities and obligations Cannot dictate/coerce professionalism Work “with” as opposed to “manage”

Characteristics of Professional Teams Identified need/service Defined body of knowledge which supports decision making Highly Educated/Broad Areas Protracted preparation process High level of public trust Strong service motivation Authority to practice from the client Accountability by the practitioner

Guiding Principles CAS Credentialing CAS Statements of Principles/Exposure Draft of Foundational Statements Regulatory/Financial/Jurisdictional Requirements ASOP’s Codes of Professional/Ethical Conduct Precept 3 : 3-1, 3-2, 3-3 Precept 8 : 8-1 Personal Beliefs - Individual, Family, Community

Stakeholders Board of Directors, Owners/Shareholders Auditors, Regulators, Others CEO, CFO, Chief Underwriter, Executive Management Team Actuarial management staff, Actuarial team Family, Friends, Community Yourself

Expectations Expectations of Stakeholders Honesty & Integrity Professionalism Knowledge - Business & Technical Credible Understandable Analysis of Alternatives Acknowledgement/Communication of Risks No surprises

Key Characteristics of Chief Actuary Clear line of sight to CEO/Audit Committee/Board Acceptance of and support for Authority over Actuarial Matters - Who sells vs. Who books. Credibility among Executive Management Experienced, qualified and communicative team with open 2-way communication at all levels - training and rotations? 2 edged sword. Assures team’s high level of active knowledge of firm’s businesses and operations

Key Characteristics Chief Actuary Identifies and shares risks and uncertainties of estimates with Executive Management Has clear understanding of assumptions and bases for conclusions drawn by support team and across operating areas in which teams operate - Consistency matters Formalizes communications with key stakeholders: Senior Executive Management, Claims, Underwriting, Pricing, Reinsurance, Finance Clear, well-documented presentation to management of support for methods, estimates and relevant changes

Key Characteristics Chief Actuary Assures stable and responsive methodologies, updated and supplemented by objective tests and special studies Vision/Proactive Anticipates future areas requiring additional analyses/data Assures a sound, high quality, relevant database to support methods - Who owns/secures? Assures clear professional and managerial direction to all staff Assures continuing education and training

The Rubber Meets the Road Example - Sample Quotes “You need to be a team player” “We can’t afford to price it that high” “Forget the tail, it gets washed out by competition” “This is an important client/quarter/year/result/etc.” “Ignore that aberration - it won’t happen again”

The Rubber Meets the Road “Just take 3 year averages and use them - can’t go wrong as it’s a time tested and utilized methodology” “There goes the bonus!” “My supervisor insists on looking at all my assumptions - rude and unprofessional.” “Guess what, my supervisor doesn’t look at any of my assumptions, unless the overall result is unexpected - no worries for me.” “The Auditor is challenging our results - YIKES, you did what???”

The Rubber Meets the Road Words have power: “We can’t afford another hit to income this quarter/year” “This kills our earnings” Leader Team Members “Just use the “tail” factors we developed in 19XX. Used the last year. We always use them. “ Leader Team Members

Conclusion Environment - Professional, Business, Personal Broad Spectrum of Stakeholders Broad Expectations - At Times Conflicting Miscommunication is high risk Theoretical vs. Actual Had to pick one: Personal Accountability

Key Characteristics of the Actuarial Leader Richard Fein, Ph D, FCAS, MAAA CAGNY Meeting June 2010 RIF Consulting, LLC Richard Fein, Ph D, FCAS, MAAA CAGNY Meeting June 2010 RIF Consulting, LLC