A Global Overview of the Actuarial Profession OECD Contractual Savings Conference Washington, DC May 1, 2002 Mo Chambers Immediate Past-President, IAA

The origin of the profession ä “actuarius” ä “actuarius” was the business manager of the Senate of Ancient Rome ä ‘actuary’ first applied to a mathematician in 1775 at the Equitable Life Assurance Society, London, UK ä by 1850 actuaries active in life insurance, friendly societies and pension schemes ä expanded to non-life, health care, social security, banking, corporate finance, financial engineering

Actuarial roles ä design and pricing of products ä establishing provisions, managing solvency ä financial reporting ä risk assessment and management ä investment management ä dynamic financial analysis ä public interest roles in regulation, supervision and reporting

Better definitions of “Actuary”? ä “The professional who makes financial sense of the future.” ä “The professional who manages the financial consequences of the uncertain.” ä “The professional who evaluates the current financial consequence of contingent future events.”

Better definitions of “Actuary”? ä The actuary uses mathematical and statistical techniques to solve problems relating to the evaluation and management of risk, especially in relation to financial instruments and the management of financial institutions such as insurance companies and pension and benefits plans.

Associations organized before 1900 ä Institute of Actuaries, London1848 ä Faculty of Actuaries in Scotland1856 ä Association of Mathematical Advisers in Dutch Life Insurance Companies1888 ä Actuarial Society of America1889 ä French Institute of Actuaries1892 ä Royal Association of Belgian Actuaries1895 ä International Actuarial Association1895 ä Italian Association for Actuarial Science1897 ä Actuarial Society of Australia1897 ä Institute of Actuaries of Japan1899

International Actuarial Association ä 1895: “Comité Permanent des Congrès d’actuaires” founded in Brussels as an association of individual actuaries ä 1968: Name changed to IAA ä 1957:ASTIN (Actuarial Studies in Non-Life) ä 1988: AFIR (Actuarial Approach to Financial Risks) ä 1991: IPEF (International Promotion and Education Fund) ä 1995: IFAA (International Forum of Actuarial Associations) ä 1998: IAA restructured ä 1999: IACA (International Association of Consulting Actuaries), formed in 1968, becomes a Section

The profession responds to globalization ä Up to 1998, IAA and its sections were more focused on serving individuals regarding the scientific aspects of the profession ä The creation of IFAA responded to the need to give special attention to professional and education standards for the associations ä in 1997, Secretariat moved to Ottawa, Canada ä IAA re-organized in 1998 as an organization of associations incorporated under Swiss law and IFAA dissolved

Outreach of the IAA ä Web site at ä Bilingual; multi-lingual facilities coming ä Geographic rotation of meetings, e.g.: ä January 1998: Paphos, Cyprus ä June 1998: Coventry/Birmingham, UK ä November 1998: Cape Town, South Africa ä April 1999: Madrid, Spain ä August 1999: Tokyo, Japan ä December 1999: Paris, France ä May 2000: Jerusalem, Israel ä November 2000: Ottawa, Canada ä April 2001: Estoril, Portugal ä October 2001: Hong Kong, China ä March 2002: Cancún, Mexico

Current membership status ä 45 Full Members ä 22 Observer Members (almost 35,000 actuaries) ä 3 Institutional Members (IASB, IAIS, ISSA)

Structure of the IAA

Committees ä Member associations may appoint a delegate to each Committee, except for Executive, Audit and Nominations Committees ä Chair and Vice-chair appointed by Council ä Committee meetings open to all Council Delegates or Alternate Delegates, except Executive Committee and Audit and Nominations Committees ä Mandates of Committees are representative of activities of IAA and of local actuarial professional associations

Committees of the IAA ä Executive ä Audit ä Nominations ä Accreditation ä Advice and Assistance ä Education ä Financial Risks ä IASB Employee Benefits Standard ä IASB Insurance Accounting Standard ä Insurance Regulation ä Services to Individual Members ä Professionalism ä Supranational Relations ä Social Security

Full membership main conditions ä Code of professional conduct ä Minimum is Code of “Groupe Consultatif”, similar to North American code ä Formal discipline process ä Minimum educational guidelines for new fully qualified members matriculating after 2005 ä Formal process for adoption of Standards of Practice ä Pay annual fee

Groupe Consultatif Principles North America Code Precepts ä A- Perform services with integrity, skill and care. ä B- Fulfill professional responsibility. ä C- Not act against the public interest. ä D- Uphold reputation of actuarial profession. ä E- Avoid publicity creating undue advantage.

Groupe Consultatif Principles North America Code Precepts ä F- Perform services with courtesy. ä G- Cooperate with others serving same client. ä H- Treat client information confidentially. ä I- Perform services only if competent and appropriately experienced to do so. ä J- Observe applicable practice standards. ä K- Show professional findings clearly as own and offer availability for discussion.

Groupe Consultatif Principles North America Code Precepts ä L- Identify the client under which findings are provided. ä M- Identify the role of the actuary with client relative to findings. ä N- Avoid conflicts of interest which impede ability to act fairly unless full disclosure. ä O- Consider appropriateness of consultation with prior actuary in newly taken assignments to ensure suitability.

Groupe Consultatif Principles North America Code Precepts ä P- Disclose to client all sources of income related to service on client’s behalf. ä Q- Avoid publicity that cannot be substantiated or may be misleading. ä R- Be subject to discipline procedures. ä S- Accept decision of discipline process.

Formal discipline process ä Complaint process accessible to peers and third parties ä Due process of defence for members ä Independent and objective formal appeal process ä Sanctions appropriate to the level of offence

Syllabus Summary ä Financial Mathematics ä Probability and Mathematical Statistics ä Economics ä Accounting ä Modeling ä Statistical Methods ä Actuarial mathematics ä Investment and Asset Management ä Principles of Actuarial Management ä Professionalism

Professional Standards Process ä a. The proposal to consider a possible standard follows an established process. ä b. The proposed standard is exposed to members, and where relevant, to third parties for comment. ä c. Comments on the exposure draft are considered. ä d. The standards are promulgated by an authority vested with such powers. ä e. The standards are published and distributed to member practitioners.

Megatrends ä emphasis on professionalism ä globalization ä distinguish nation and non-nation specifics ä convergence of education standards ä expansion into non-traditional areas ä mutual recognition ä creation of associations in “less actuarially developed areas”