1. Current CAS Issues and Directions Oakley E. (Lee) Van Slyke, FCAS Casualty Actuaries of the Southeast April 12, 2005 Nashville, TN

2. Agenda CAS Centennial Goal CAS Centennial Goal ERM Initiatives ERM Initiatives 2004 Task Force Reports on ACAS Vote and Classes of Membership 2004 Task Force Reports on ACAS Vote and Classes of Membership Basic Education Initiatives Basic Education Initiatives Research Working Parties Research Working Parties Continuing Education Continuing Education Image of the Actuary Campaign Image of the Actuary Campaign Your Input Your Input

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

4. Implementing the Centennial Goal Centennial Goal Implementation Task Force Centennial Goal Implementation Task Force Subcommittee of Long Range Planning Committee Subcommittee of Long Range Planning Committee Working with Vice Presidents and Committee Chairs in setting goals. Working with Vice Presidents and Committee Chairs in setting goals. How does my committee and its goals support the Centennial Goal? How does my committee and its goals support the Centennial Goal? SAM Goals SAM Goals Significant, Attainable, Measurable Significant, Attainable, Measurable Interim milestones to help gauge progress towards the Centennial Goal. Interim milestones to help gauge progress towards the Centennial Goal.

5. ERM Initiatives During its March 2-3, 2005 meeting, the CAS Board took actions to help the actuarial profession benefit from new opportunities in Enterprise Risk Management (ERM) During its March 2-3, 2005 meeting, the CAS Board took actions to help the actuarial profession benefit from new opportunities in Enterprise Risk Management (ERM) Approved Joint CAS/SOA Risk Management Section. Approved Joint CAS/SOA Risk Management Section. Launched partnership with Enterprise Risk Management Institute International, Ltd. (ERMII). Launched partnership with Enterprise Risk Management Institute International, Ltd. (ERMII). Created new Vice President position to oversee ERM-related activities. Created new Vice President position to oversee ERM-related activities.

6. Risk Management Section Similar to the existing CAS special interest sections CARe and AIR. Similar to the existing CAS special interest sections CARe and AIR. Both CAS and SOA members are eligible to serve on the Council that guides the activities of the Section. John J. Kollar is currently serving as CAS representative; others will be added. Both CAS and SOA members are eligible to serve on the Council that guides the activities of the Section. John J. Kollar is currently serving as CAS representative; others will be added. Members who are interested in risk management are encouraged to join the Section. Annual dues are only $20. Members who are interested in risk management are encouraged to join the Section. Annual dues are only $20.

7. Other ERM Initiatives ERMII is a private, not-for-profit, independent educational and research organization led by CAS Fellow Shaun Wang. ERMII is a private, not-for-profit, independent educational and research organization led by CAS Fellow Shaun Wang. ERMII is co-sponsored by an international group of universities and professional organizations including Georgia State University, University of New South Wales, University of Illinois, Wuhan University (China), and the CAS. ERMII is co-sponsored by an international group of universities and professional organizations including Georgia State University, University of New South Wales, University of Illinois, Wuhan University (China), and the CAS. New VP to oversee and coordinate ERM-related activities. New VP to oversee and coordinate ERM-related activities.

8. 2004 Task Force Reports Task Force on the ACAS Vote Task 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 Membership Task 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?

9. Board Findings on ACAS Vote Right to vote should be granted upon earlier of: Fellowship or five years after Associateship. Right to vote should be unrestricted. Right to vote should be granted upon earlier of: Fellowship or five years after Associateship. Right to vote should be unrestricted. All voting members should be allowed to stand for election to the Board of Directors. All voting members should be allowed to stand for election to the Board of Directors. Voting Associates may hold all officer positions, with the exception of: Voting Associates may hold all officer positions, with the exception of: President / President Elect President / President Elect Vice President - Admissions Vice President - Admissions Committee membership is to remain restricted to Fellows for Discipline, Education Policy, Syllabus, Fellowship Exam Committees. Committee membership is to remain restricted to Fellows for Discipline, Education Policy, Syllabus, Fellowship Exam Committees.

10. Board Findings on Classes of Membership Board Motions at September 2004 Board Meeting: That the Board instruct the Executive Council to establish a TF to propose within the next year a set of learning objectives by which FCAS can be attained: That the Board instruct the Executive Council to establish a TF to propose within the next year a set of 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 with eight exams (or seven exams with a workshop or seminar). It is the Board’s sense that this can be accomplished with eight exams (or seven exams with a workshop or seminar).

11. Board Findings on Classes of Membership Board Motions at September Board Meeting: Inform the CAS membership of the foregoing action, with an indication that the Board supports a move to an eventual single class of credentialed membership, with no more new Associates, concurrent with the movement to a shorter syllabus; and will seek membership reaction to this plan. (It is expected that the then-current Associates will either complete their remaining exams and become Fellows, or remain Associates until they cease their membership in the CAS.) Inform the CAS membership of the foregoing action, with an indication that the Board supports a move to an eventual single class of credentialed membership, with no more new Associates, concurrent with the movement to a shorter syllabus; and will seek membership reaction to this plan. (It is expected that the then-current Associates will either complete their remaining exams and become Fellows, or remain Associates until they cease their membership in the CAS.)

12. Membership Involvement Board is committed to obtaining member input. Board is committed to obtaining member input. Granting voting rights requires an amendment to the Constitution approved by Fellows, however, the Board agreed to postpone further action on the ACAS Vote, pending resolution of the Classes of Membership issue. Granting voting rights requires an amendment to the Constitution approved by Fellows, however, the Board agreed to postpone further action on the ACAS Vote, pending resolution of the Classes of Membership issue. Moving to one class of credentialed member may not require a change to the Constitution, but there will be a thorough exchange of ideas. Moving to one class of credentialed member may not require a change to the Constitution, but there will be a thorough exchange of ideas.

13. Changes to Preliminary Education 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 hours) Exam 2: Interest, Economics, Finance (4 hours) Exam 3: Actuarial Models – NOT JOINT (4 hours) Exam 3: Actuarial Models – NOT JOINT (4 hours) Exam 4: Actuarial Modeling (including applied stats) (4 hours) Exam 4: Actuarial Modeling (including applied stats) (4 hours)

14. Changes to Preliminary Education Starting Spring 2005 (joint with SOA) Prerequisites: Linear Algebra and Calculus Prerequisites: Linear Algebra and Calculus Validation by Educational Experience: Economics, Finance, Applied Stats Validation by Educational Experience: Economics, Finance, Applied Stats Exam 1: Probability with Calculus (3 hours) Exam 1: Probability with Calculus (3 hours) Exam 2: Interest (2 hours) Exam 2: Interest (2 hours) Exam 3: Actuarial Models & Statistics (4 hours) Exam 3: Actuarial Models & Statistics (4 hours) Exam 4: Actuarial Modeling (4 hours) Exam 4: Actuarial Modeling (4 hours)

15. Why VEE? Most candidates already take Econ and/or Finance during university study. Most candidates already take Econ and/or Finance during university study. No need to examine topics that require background but not mastery. No need to examine topics that require background but not mastery. But verification is needed to meet international standards. But verification is needed to meet international standards. Exam questions for Applied Stats stress memorization rather than application. Exam questions for Applied Stats stress memorization rather than application. Our candidates need to learn how to appropriately apply regression and time series models to real data. Our candidates need to learn how to appropriately apply regression and time series models to real data. This competency cannot easily be validated in a timed paper-and-pencil exam. This competency cannot easily be validated in a timed paper-and-pencil exam.

16. Validation by Educational Experience Option 1: Submit a course syllabus for approval, and then a grade of B- or better in the course. Option 1: Submit a course syllabus for approval, 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 Finance Intermediate Corporate Finance Regression and Time Series (could be separate courses) Regression and Time Series (could be separate courses) Option 2: Pass an acceptable exam, such as the AP exams for Micro and Macroeconomics, CFA exams, etc. Option 2: Pass an acceptable exam, such as the AP exams for Micro and Macroeconomics, CFA exams, etc. Option 3: Pass college-level exams offered by the CAS. Option 3: Pass college-level exams offered by the CAS. CAS committed to offering these for at least 2 years. CAS committed to offering these for at least 2 years. Option 4: Other experiences. Option 4: Other experiences. Courses/seminars designed specifically for VEE credit. Courses/seminars designed specifically for VEE credit.

17. Impact on Candidates 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 majors Other 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 high. VEE course first-time pass rates should be very high.

18. Computer Based Testing Candidates take exam at a standardized testing center. Candidates take exam at a standardized testing center. Can schedule exam any time during a specified period (e.g. one week). Can schedule exam any time during a specified period (e.g. one week). Software tutorial provided online and before exam begins (e.g. 3 ½ hour exam appointment includes ½ hour for setup and tutorial). Software tutorial provided online and before exam begins (e.g. 3 ½ hour exam appointment includes ½ hour for setup and tutorial). User friendly software with easy navigation. User friendly software with easy navigation. Potential for immediate grading. Potential for immediate grading.

19. CBT Implementation for Exam 1 May 2005 - standard paper and pencil exam. May 2005 - standard paper and pencil exam. September 2005 - CBT (possible paper and pencil backup without access to CBT centers). September 2005 - CBT (possible paper and pencil backup without access to CBT 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 some time in 2006. Immediate release of grades beginning some time in 2006. Rollout to other exams in future years. Rollout to other exams in future years.

20. Code of Professional Conduct Beginning in 2006, candidates taking CAS Exams 3, and 5-9 will be required to agree to abide by the terms and conditions of the CAS Code of Professional Conduct. Beginning in 2006, candidates taking CAS Exams 3, and 5-9 will be required to agree to abide by the terms and conditions of the CAS Code of Professional Conduct. Recognizes that candidates who have not yet achieved Associateship perform responsible actuarial work and that this work should be done within the framework of the Code. Recognizes that candidates who have not yet achieved Associateship perform responsible actuarial work and that this work should be done within the framework of the Code.

21. Modeling Workshop Education in risk integration techniques is consistent with Centennial Goal. Education in risk integration techniques is 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 test in a paper-and-pencil environment. DFA taken off Part 8 in 2003 due to inability to test in a paper-and-pencil environment. Modeling Workshop Task Force established. Modeling Workshop Task Force established. Piloting a hands-on workshop experience, with the final pilot being conducted with new Fellows in May. Piloting a hands-on workshop experience, with the final pilot being conducted with new Fellows in May. Consider adding this as a future FCAS requirement and/or continuing education opportunity. Consider adding this as a future FCAS requirement and/or continuing education opportunity.

22. FCAS Education Task force established in late 2004 to review Exams 5-9 Task force established in late 2004 to review Exams 5-9 Goal is to reduce total number of exams by one (i.e., 8 exams plus VEE) Goal is to reduce total number of exams by one (i.e., 8 exams plus VEE) May include a mandatory workshop (e.g., case studies on risk integration modeling) May include a mandatory workshop (e.g., case studies on risk integration modeling) Recommendations due to CAS Board in September 2005 Recommendations due to CAS Board in September 2005

23. Research Working Parties Research task forces charged to produce a research product over a short timeframe. Research task forces charged to produce a research product over a short timeframe. Should produce more cohesive, accessible material in a consistent format, through the collective, managed nature of the process. Should produce more cohesive, accessible material in a consistent format, through the collective, managed nature of the process. Should help the CAS effectively address long- standing research problems, and harness the research energy of individual researchers. Should help the CAS effectively address long- standing research problems, and harness the research energy of individual researchers. Have proven to be effective research mechanisms for GIRO, the general insurance research organization of the Faculty and Institute of Actuaries (UK). Have proven to be effective research mechanisms for GIRO, the general insurance research organization of the Faculty and Institute of Actuaries (UK).

24. Research Working Parties 2003-04 Correlations and Dependencies Among All Risk Sources Correlations and Dependencies Among All Risk Sources Executive-Level Decision-Making Using Dynamic Risk Modeling Executive-Level Decision-Making Using Dynamic Risk Modeling Elicitation and Elucidation of Risk Preferences Elicitation and Elucidation of Risk Preferences Quantifying Variability in Reserves Estimates Quantifying Variability in Reserves Estimates

25. Research Working Parties 2004-05 Dynamic Risk Modeling Handbook Dynamic Risk Modeling Handbook Public-Access DFA Model Public-Access DFA Model Bornhuetter-Ferguson - Initial Expected Losses Bornhuetter-Ferguson - Initial Expected Losses Tail Factors Tail Factors

26. Continuing Education AAA Exposure Draft recommends that the Qualification Standards apply to all “statements of actuarial opinion” defined as follows: … an opinion expressed by an actuary based upon actuarial considerations, and intended by the actuary to be relied upon by the outside person or organization to whom the opinion is addressed. The phrase “outside” person or organization refers to persons or organizations other than the actuary’s direct employer. A statement of actuarial opinion, although usually conveyed in writing, may also be conveyed orally.

27. 2005 Calendar of Events ERM Symposium May 1-3, 2005, Chicago, IL ERM Symposium May 1-3, 2005, Chicago, IL CAS Spring Meeting May 15-18, 2005, Phoenix, AZ CAS Spring Meeting May 15-18, 2005, Phoenix, AZ Seminar on Reinsurance June 6-7, 2005, Hamilton, Bermuda Seminar on Reinsurance June 6-7, 2005, Hamilton, Bermuda Casualty Loss Reserve Seminar September 12-13, 2005, Boston, MA Casualty Loss Reserve Seminar September 12-13, 2005, Boston, MA Special Interest Seminar on Predictive Modeling September 19-20, 2005, Chicago, IL Special Interest Seminar on Predictive Modeling September 19-20, 2005, Chicago, IL CAS Annual Meeting November 13-16, 2005, Baltimore, MD CAS Annual Meeting November 13-16, 2005, Baltimore, MD

28. Image of the Actuary Campaign Profession-wide campaign. Image Advisory Group, made up of members from each of the North American actuarial organizations, oversees campaign. Campaign kick-off CD ROM sent to all actuaries. www.imageoftheactuary.org/ for more information. www.imageoftheactuary.org/

29. I welcome your input regarding... CAS Centennial Goal CAS Centennial Goal ACAS Task Forces ACAS Task Forces Basic Education Initiatives Basic Education Initiatives Research and Publications Research and Publications Continuing Education Continuing Education International Issues International Issues CAS Role Outside Traditional P/C Insurance CAS Role Outside Traditional P/C Insurance What’s On Your Mind? What’s On Your Mind? Questions? Questions?

30. Thank You!