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2. 2 CRUSAP: AN OVERVIEW AND INTRODUCTION TO THE CRUSAP REPORT

3. 3 WHAT IS CRUSAP AND WHY HAS IT BEEN UNDERTAKEN? ▪ Critical Review of the U.S. Actuarial Profession ▪ Catalyzed by the Morris Review of the UK Actuarial Profession ▪ Perceived Need to Determine Whether the Actuarial Needs of the Public Are Being Met

4. 4 WHAT IS CRUSAP AND WHY HAS IT BEEN UNDERTAKEN? (continued) Evidence of the perceived need:  Globalization  US Accounting Problems  Shifts in the Nature of Retirement Plans  Changes in the Financing of Health Insurance  Emergence of New Fields of Practice for Actuaries

5. 5 WHEN WAS CRUSAP BEGUN, AND BY WHOM? A Presidential Task Force of the American Academy of Actuaries established CRUSAP at the May 2005 meeting of the Academy’s Board of Directors. The Academy’s Board of Directors includes the presidents and presidents-elect of the four other U.S.-based actuarial organizations:  American Society of Pension Professionals and Actuaries (ASPPA)  Casualty Actuarial Society (CAS)  Conference of Consulting Actuaries (CCA)  Society of Actuaries (SOA)

6. 6 WHAT IS INCLUDED IN CRUSAP ’S SCOPE?  Actuarial Needs of the Public (with the definitions of each of the three terms an important component of the CRUSAP study process)  Education and Training (including the qualifications process)  Ethics and Professionalism (the Code of Professional Conduct, the Actuarial Standards Board (ASB) and more)

7. 7 WHAT IS INCLUDED IN CRUSAP ’S SCOPE? (continued)  Oversight and Regulation (internal & external, the Actuarial Board for Counseling and Discipline (ABCD), and more)  Actuarial Communications (conveying uncertainty without undermining confidence)  Structure of the Profession (are we right or wrong, in the United States, to have multiple organizations)

8. 8 WHO BEARS THE RESPONSIBILITY FOR CRUSAP WORK? Task Force of Seven Actuaries Fred Kilbourne, Chairman Bob Collett Ken Kent Guy King Jim Rech Jack TurnquistTerri Vaughan  All seven are members of the Academy and SOA. Some are members of ASPPA, CAS, and CCA.  Members include five past presidents of national actuarial organizations.  Most members are, or have been, consultants; one is an educator; and another is a former government actuary.

9. 9 WORKING WITH THE CRUSAP TASK FORCE ▪ The Executive Director of the Academy, Kevin Cronin, was actively involved with the Task Force. ▪ A full-time Project Manager, Mindy Reiser, was engaged for the duration of CRUSAP.

10. 10 THE CRUSAP ADVISORY PANEL  Thirty individuals (26 men and four women) were on the Advisory Panel. One panel member, Prof. James Hickman, died during the course of the project.  Twelve panel members (40%) were not actuaries. Practice areas of the Actuaries on the Advisory Panel: ▫ Casualty (4) ▫ Pensions (4) ▫ Life (1) ▫ Health (2) ▫ Social Insurance (3) ▫ Investment (1) ▫ Professors of Actuarial Science (3)

11. 11 THE CRUSAP ADVISORY PANEL NON-ACTUARIES Professional Backgrounds of the Non-Actuaries on the Panel: ▫ Former Deputy Commissioner, Social Security Administration ▫ State Insurance Commissioner ▫ Head of a Public Retirement System ▫ Vice President, Health Policy/Government Affairs, Major U.S. Corporation ▫ Executive Director, a Private Health Alliance

12. 12 THE CRUSAP ADVISORY PANEL (continued) ▫ Health Economist ▫ Attorney Specializing in Defense of Actuaries ▫ President, Financial Services Subsidiary of a Major Insurer ▫ Senior Financial Services Markets Specialist for a Federal Reserve Bank ▫ Two Professors of Insurance and Risk Management ▫ Chief Regulator of UK Actuaries (due to the Morris Review)

13. 13 CRUSAP FINAL REPORT  Issued on Jan. 10, 2007 and posted on the CRUSAP website www.crusap.net www.crusap.net  Report builds on the CRUSAP Draft Report, completed October, 2006  The Draft Report was reviewed by the CRUSAP Advisory Panel, with additional feedback provided by the leadership of U.S.-based actuarial organizations

14. 14 CRUSAP FINAL REPORT (continued) Input to the Report: ▫ Collected more than 1,400 survey responses to CRUSAP Web- based surveys for actuaries and non-actuaries (about 95 percent of respondents were actuaries) ▫ Task Force conducted more than 80 in-depth interviews of selected individuals ▫ Organized a focus group with actuarial science students at Drake University, Des Moines, IA, and a dialogue with actuarial science students at the University of Michigan ▫ Gathered actuarial and other literature with a bearing on the project

15. 15 INPUT TO THE CRUSAP REPORT (continued) ▫ Conducted approximately two dozen Task Force meetings. Four of these meetings were held in Washington – with three of the sessions, a day and one-half in length. Others were by conference call, generally of 90-minute duration each. ▫ Gave CRUSAP presentations to actuarial organizations to solicit comments including the Academy, CAS, CCA, the North American Actuarial Council (NAAC), the 28 th International Congress of Actuaries, the International Actuarial Association.

16. 16 STRUCTURE OF THE CRUSAP REPORT For each of the areas within the report scope, one Task Force member had primary responsibility, with a second Task Force member serving as initial reviewer and critic. Their responsibilities are the following: Bob Collett – Lead Analyst for Actuarial Needs of the Public (Section I), seconded by Guy King Jim Rech – Lead Analyst for Education and Training (Section II), seconded by Terri Vaughan Ken Kent – Lead Analyst for Ethics and Professionalism (Section III), seconded by Jack Turnquist

17. 17 STRUCTURE OF THE CRUSAP REPORT (continued) Terri Vaughan – Lead Analyst for Oversight and Regulation (Section IV), seconded by Ken Kent Jack Turnquist – Lead Analyst for Actuarial Communications (Section V), seconded by Jim Rech Guy King – Lead Analyst for Structure of the Profession (Section VI) seconded by Bob Collett Fred Kilbourne wrote the Chairman’s Letter and, together with the project manager, served as the report editor. The Executive Summary was written by Mindy Reiser, project manager.

18. 18 CRUSAP REPORT FINAL RECOMMENDATIONS

19. 19 CRUSAP REPORT SPECIFIC RECOMMENDATIONS MEETING THE ACTUARIAL NEEDS OF THE PUBLIC 1. Define actuarial science as “the quantification, analysis, and management of future contingent risk and its financial consequences.” 2. In order to meet all the anticipated needs of the public, make a home somewhere within the actuarial profession for all persons doing competent actuarial work. 3. Encourage individual actuaries to gain sufficient knowledge to speak out on actuarial elements of major public issues.

20. 20 CRUSAP SPECIFIC RECOMMENDATIONS (continued) EDUCATING AND TRAINING ACTUARIES 4.Increase the use of alternative delivery systems to educate and examine prospective actuaries. 5.Require active members of the actuarial profession to meet consistent continuing education requirements. 6. Define the actuarial value proposition by the board of directors of each actuarial professional organization.

21. 21 CRUSAP SPECIFIC RECOMMENDATIONS (continued) ETHICS AND PROFESSIONALISM 7. Promote profession-wide discussion of actuarial ethics as set forth in Precept 1 of the Code of Professional Conduct. 8. Sponsor research to enhance the ability of the profession to meet the actuarial needs of the public. 9. Continue to promote the development and establishment of Actuarial Standards of Practice appropriate for the emerging principles-based regulatory environment.

22. 22 CRUSAP SPECIFIC RECOMMENDATIONS (continued) OVERSIGHT AND REGULATION 10. Enhance the ability of the ABCD to identify possible violations of the Code of Professional Conduct. 11. Establish a joint disciplinary process for the profession, independent of the individual actuarial organizations. 12. Benchmark disciplinary processes for U.S. actuaries against those of other U.S. professions and of actuaries in other countries. 13. Provide for participants in the standards and discipline process by professional who are not actuaries.

23. 23 CRUSAP SPECIFIC RECOMMENDATIONS (continued) ACTUARIAL COMMUNICATIONS 14.Require training and demonstrated proficiency in communications skills as part of the basic education and qualification of actuaries. 15.Develop a website specifically directed at the users of actuarial services and the general public. 16.Retain a firm specializing in professional organization communications to perform a study of the current communication activities of the U.S.-based actuarial professional organizations.

24. 24 CRUSAP SPECIFIC RECOMMENDATIONS (continued) STRUCTURE AND OPERATION OF THE PROFESSION 17. Establish a group (task force, committee, team) specifically charged with reviewing and implementing, where feasible, the recommendations in this report. 18. Establish a broad-based independent group (task force, committee, convention) charged with reviewing the actions and advising the group proposed in the preceding recommendation. 19. Establish consolidation of the U.S. actuarial profession as a goal of the profession.

25. 25 WHAT IS THE DESIRED RESULT ? ■ Report acceptance (Based on Supported Conclusions and Feasible Recommendations) ■ Endorsement by the Actuarial Organizations of the Recommendations in the Report ■ Success by Actuaries in Identifying and Meeting the Actuarial Needs of the Public

26. 26 QUESTIONS