From the Readers
Readers Respond to Mutual Recognition
Dear Editor: I've been following the various discussions concerning Mutual Recognition with a great deal of interest. While I personally am against granting Fellowship (or anything close to it, including Associateship) to members of other actuarial bodies, I do believe some level of Mutual Recognition, including the exchange of practice rights, is desirable and necessary. The implications of granting Fellowship to members of other actuarial bodies are so far-reaching that a decision should not be reached in the heat of the moment and no action should be taken unless there are good and compelling reasons for doing so. The simple statement that everyone else is doing it is not a valid reason, nor is the sort of vague feel-good reasoning that flows from "Wouldn't it be wonderful if all actuaries belonged to one common body and...."
As a number of respondents posting to the various discussion threads on the CAS Web Site (see both the Student and Member Forums ) have pointed out, there is a difference between practice rights and Fellowship. Practice rights already exist, albeit in an incomplete and confusing format. To somewhat oversimplify, subject to any applicable immigration restrictions, an FCAS is free to accept a job in U.K. and is free to do whatever work his or her employer thinks is appropriate. Further, an FCAS can apply to and become an Affiliate of the Institute of Actuaries, which, subject to the appropriate experience requirements, will allow him or her to sign loss reserve opinions. The reverse situation is much the same. An FIA can accept a job in the U.S., join the American Academy of Actuaries and, subject to the approval of the Casualty Practice Council, can sign loss reserve opinions. In Canada, an FIA who sits a Canadian content exam, has relevant experience, and completes a sufficient amount of Canadian continuing education can become a Fellow of the Canadian Institute of Actuaries, which allows him or her to sign Canadian opinions. I think this practice is healthy and should be encouraged.
Granting Fellowship (or something close to it) is a very different question. At present an FCAS or FIA means something significant because, among other things, individuals with that designation have passed a very difficult set of examinations set by their respective organizations. At present the CAS is the only actuarial society I am aware of whose examination syllabus is concentrated almost entirely on non-life topics. Employers do value that. The Institute exam system is different, not necessarily easier or harder, just different, and has a very different focus. Why would the Institute want to confer an FIA on an FCAS when that FCAS has had, at most, half of one exam focusing on life contingencies and his or her application to life and pension insurance? By the same token, why would the CAS want to confer an FCAS (or something close to it) on an FIA who has only written one or two P&C exams?
As someone who has worked for a major consulting firm as well as large multinational insurers and reinsurers, I can confirm that the FCAS designation is well respected in Europe and there is a demand for FCASs in London, Zurich, and Bermuda as well as the United States and Canada. I do know a limited number of FIAs that live and work in the United States and Canada but I cannot speak to the market demand in that area. (A recent article in the U.K. journal, The Actuary, indicates that there are 71 FIAs and FFAs currently in Canada so the barriers to transferring westward across the Atlantic are not insurmountable.)
The CAS Task Force on Mutual Recognition is reviewing the new Institute exam syllabus in an attempt to decide whether someone who becomes an FIA under the new system has, with the exception of country-specific material, covered much or most of the material that an ACAS would under our new Syllabus 2000. The difficulty with this comparison is that this will tell us whether an FIA who qualifies in the future should have a comparable education to an ACAS who qualifies at that time. Unfortunately it does not tell us whether an existing FIA's training was in any way comparable to an existing ACAS's (or FCAS's). This latter comparison is the one the Committee should be making. By the same token, an FCAS has not had the same training in life and pension insurance that was enjoyed by an FIA. While I can't pretend to speak for the Institute I can't help but wonder why the minimal life and pension content of the CAS exams does not appear to matter to that body.
One argument in favor of Mutual Recognition that is difficult to dismiss out of hand is "What happens to the CAS if everyone else does it and we don't?" Since the SOA and the Institute are pursuing their own version of Mutual Recognition (part of the "Big Tent" discussion), if the CAS doesn't participate will the SOA start offering casualty exams and make the CAS completely redundant? Very good question. However, what will happen if the SOA and the Institute agree to award Fellowship to each other's members and the CAS and the Institute reach the same agreement? Even if we insist that to become an FCAS, an FIA must have completed the Institute's casualty exams, what is to stop an FSA from becoming an FIA, writing that body's casualty exams, and applying for CAS membership? Doesn't this potentially provide a "back door" to CAS membership for FSAs? The situation is further complicated by the European Union which allows European actuaries to join the Institute and provides a further pool of potential FIAs whose education and training differs by country from that provided by the Institute itself. While I do not know what will happen to the CAS if we do not embrace Mutual Recognition, I firmly believe that, if we do, the CAS will cease to exist in any meaningful way.
As pointed out in one posting on the CAS Web Site, proposals submitted to committees tend to take on lives of their own. The current discussions on Mutual Recognition are reminiscent of those that surrounded exam partitioning some years ago. At that time it was very difficult to find anyone, Fellow, Associate, or student, who was in favor of the concept but, in spite of that, partitioning still went ahead. We have since decided that was a mistake and are now somewhat painfully pulling back (at no slight cost in good will among our student population, I might add). However difficult this was in the case of partitioning, we will not be able to pull back from any sort of Mutual Recognition pact with the same "ease." Consequently, not only must all of the issues be considered very carefully but any potential agreement must be submitted to a vote of the full membership. Not to do so will, at best, seriously jeopardize the credibility of our elected executive.
One significant consideration is the question of equity. The CAS regularly fails two thirds of the people writing any given exam. We subject people to incredible pressures to survive what is arguably one of the toughest professional qualification systems in the world. (If anyone doubts how students feel about these points I strongly suggest they read some of the student discussion threads concerning exams.) And now we're considering telling these same people that they didn't have to do it. There is now an alternative way to join the CAS—become an FIA. Whether that route is easier, harder, or otherwise is not the point. And, to add insult to injury, we are willing to admit an unknown number of new Fellows, or Associates, as the case may be (I don't think we should underestimate the number of potential candidates). Somehow this does not satisfy my definition of equity. This will have the greatest impact on new Fellows, Associates, and, of course, students. It will have relatively little direct impact on those senior Fellows whose careers are already well established. This latter category includes the majority of the directors and officers of the CAS.
I could continue for several more pages with questions and issues that need to be considered before any action is taken. Many of these would be rehashes of points raised by others in their various posts but they all lead me to the conclusion that offering Fellowship or Associateship to individuals who have not written the CAS exams would be a serious mistake.
J. Scott Bradley, FCAS
The "Mutual Recognition" issue is also faced by SOA, but is nowhere near as critical for us as CAS, because FIAs do have a strong life/health educational background. Even so, I have several basic concerns:
1. The issue seems totally driven by the desire for "practice rights." This is really an issue for the AAA rather than CAS/SOA.
2. I have queried the SOA Presidential Candidates whether Fellows would get to vote on this. The basic answer from all 3 is "NO"! From discussions in the CAS Student Discussion Forum (which I frequent regularly), FCAS responses on this topic say the same thing! I think this is out of hand.
3. Despite my FSA and many years of life/health experience, I switched to P/C in 1987. I am bound by SOA, AAA, and CAS (as an Affiliate Member) in my practice. This is, in my humble opinion, exactly how things should be. I do NOT want (and would never accept) ACAS or FCAS without passing the requisite exams. Given that, why should I agree to Mutual Recognition as currently presented?
I think all Fellows of both SOA and CAS need to speak on this issue now, before "the deed is done."
Brad Gile, FSA
Dear Ms. Gannon and Mr. Lehmann:
This letter is being sent to you in response to the encouragement to members provided by Mavis Walters (The Actuarial Review, November 1998) to share our views on the issue of Mutual Recognition. I tried to be brief, but have not succeeded, so please bear with me as I outline my thoughts for you.
I agree with a number of Ms. Walters' assertions:
1. There ARE some very difficult issues that need to be addressed.
2. The CAS IS the only organization specializing in P/C issues (why the CAS is special) and it is true that no other education and examination structure comes close to ours.
3. FCAS (nor ACAS for that matter) should NOT be granted to those unfamiliar with our legal, regulatory, and accounting systems.
I feel strongly that Mutual Recognition will harm the casualty actuarial profession in North America, because, witness 2 and 3 above, it represents an invitation to actuaries unfamiliar with casualty issues and our legal, regulatory, and accounting systems to practice on such issues and systems. The high regard and respect for the casualty profession will be harmed if such unqualified individuals, acting as casualty actuaries, perform their duties in a fashion that fails to meet the high standards to which today's credentialed casualty actuaries are measured.
For example, there may be a very small number of CAS members who would find it appealing to be able to practice in Australia, but my personal opinion is that there are a lot more actuaries from outside North America looking for North American recognition than North American actuaries looking for recognition outside this continent. If not, then why does Ms. Walters indicate that Mutual Recognition is "now being pursued somewhat more vigorously, particularly by our colleagues outside of North America"? At the risk of being accused of being xenophobic, I suggest that the influx of actuaries from abroad that would result from Mutual Recognition would devalue the credentials of all casualty actuaries currently practicing in North America. But this, of course, is secondary to the issue of professionalism.
Let me quote p. 26 of the 1999 Syllabus, under the topic, "Waiver of Examinations for Associateship": "Individuals who claim competence in the areas covered by the examinations should not have difficulty demonstrating their competence by participating in the examination process."
This is a strong statement that continues to be true today. One of the beauties of our profession that attracted me to it initially and continues to attract others today, indeed, is a selling point on the profession, is that, imperfect as it may be, the examination process is an objective process. It's never made a difference what color one's skin was, what one's religion was, who one's contacts were, how ugly a person was, if you were able to pass the exams, you could succeed in this field, get your credentials, and, hopefully, perform work on a daily basis that measured up to the standard applied by North American casaulty actuaries. I hasten to add to the list, it didn't make a difference what continent you were from or from where you've gained your experience to date, if you could pass the exams, you could succeed in this field and get credentialed. The common bond between all North American casualty actuaries is the education achieved via the rigorous North American casualty examination route. Indeed, our psychological and professional identities are practically defined by the exam process and our interactions with it. Mutual recognition threatens to open our field up to those without the appropriate education to practice in the areas in which we practice.
When I visit my actuarial buddies in Bermuda, I drive on the left while visiting, and adhere to that island's rules of the road, at least my limited understanding of them, even though I'm used to driving on the right. As a tourist, I'm not required to obtain a Bermudan driver's license but I certainly would have to do so if I moved there permanently and planned on practicing the "science of driving" there on a regular basis. I wouldn't try to overhaul the driver licensing system of Bermuda to make exceptions for special classes of people of which I am a member. Chances are I'd have to take a road test, written test, eye test, etc., even though I have a perfectly fine Florida driver's license that allows me to drive anywhere in my current country. Why should I expect anything else? So why then should the practice of casualty actuarial science, North American style, be any different? Does "when in Rome, do as the Romans" sum up this school of thought?
Regarding item 1, I'd like to ask a couple of questions. One, would a "mutually recognized" FCAS (MRFCAS) be allowed to vote? Second, would a MRFCAS be allowed to participate on all CAS committees? As an 8-exam ACAS who has not given up on attaining FCAS, but who nonetheless is still an 8-exam ACAS, I would find it particularly appalling and insulting if a MRFCAS who knew little about our exam process could vote and help administer our exams.
Paul Chabarek, ACAS
Building a Better Mousetrap
It was interesting to read about the qualification procedures for actuaries in foreign lands, and I appreciate Victoria Stachowski and Alice Underwood's article bringing us up to date. But I was disconcerted by their reaction to some unidentified European actuary's paraphrased comment about the lack of American actuaries' math ability at an undisclosed meeting somewhere across the pond. They seem to think that there is a bit of extra resentment aimed at CAS members. I've traveled internationally on behalf of the CAS, and I never noticed this resentment. They also say that "[o]ne way for the CAS to gain greater acceptance abroad would be to give more acknowledgment of other actuarial institutions." Don't get me wrong—I am in favor of respect for other professions. But it seems to me that the way we get more acceptance (if, indeed, we actually need that, which I question) is not through patronage, as they suggest, but through actually doing a better job of being actuaries. I have always been of the "build-a-better-mousetrap" school in terms of what to do to enhance the view of actuaries abroad or anywhere else for that matter.
They seem to believe that creating the designation of "affiliate" of the CAS has alleviated a number of problems, and they indicated in their article that this is a class of membership. Are Affiliates actually members of the CAS? If so, what does this entitle them to represent to clients and to the public?
Irene K. Bass, FCAS
We'd like to thank Ms. Bass for her comments and offer some of our own. We included the introductory anecdote to illustrate one aspect of the tensions and misconceptions that can occur between members of different actuarial societies. The attitude of the unidentified speaker is one that we have encountered from time to time while working abroad. However, we did not intend to categorize the non-American actuarial world as having either a low opinion of the CAS or a high opinion of the CAS.
We have encountered many different views. In general, most people seem to have high respect for CAS actuaries' abilities and qualifications. We have noticed a certain frustration, however, in that this respect has not always been felt to be reciprocated.
We certainly agree with Ms. Bass that CAS actuaries should strive to do the best job possible. To the extent that the CAS perceives weaknesses in its qualification process—and we did not intend to imply that differences between the CAS and European societies as regards abstract mathematics constitute such—efforts should be made to remedy them. But we do believe that communication between the CAS and other societies could be improved. There have been certain recent steps in this direction, including the establishment of an international vice president, and the meetings taking place between the CAS and other actuarial institutions (currently only English-speaking institutions, but we must start somewhere).
We also believe that the Affiliate membership which permits a listing in the Yearbook and equal access to most information, but restricts the use of our designations—will help to facilitate communication and mutual respect between the societies and their members.
Victoria Stachowski, FCAS and Alice Underwood, FCAS
Election or Beauty Pageant
I've just cast my vote in the annual CAS Beauty Contest…er, I mean officer and board elections. Instead of knowing what my vote will mean for the important issues considered by the Board, I get the feeling every year at this time as if I am back in high school during student council voting. Sure, we don't have the distraction of banners hanging in the halls exhorting us to vote for the most earnest (and usually underdog) candidate. My choices today were more like those understated candidates of yore who did not campaign; they just let their "coolness" get them elected. What do we really know to make these choices? All candidates provide brief resumes describing when they achieved their designations, their employment, and their past volunteer activities. Again, the parallels to student council elections are eerie. With those teenaged hopefuls, we knew what class they were in, which team, band or cheerleader squad they captained and they told us about running the fundraiser last year during the basketball games.
But, enough of yesteryear—what are we electing the Board to do today? Paraphrasing the constitution, their duties include voting on new members, supervising publications of papers, supervising exams, ratifying committee and special appointments made by the president, authorizing statements of principles and managing the affairs of the Society.
It is this last duty, "managing the affairs of the Society," that seems to be growing in importance. The black and white of the resume tells us little of what candidates think about topics such as cooperation/partnership with other actuarial societies, the examination process, exam travel time, and mandatory standards versus guidelines. These are just a few of the controversies aired in recent editions of The Actuarial Review. More important, why does a candidate want the position? The days are past when the CAS was small enough that you just knew everybody and you could pretty well guess what a person would do if elected. We're a big organization now and it's time our election process recognizes this.
To facilitate a knowledgeable election process, the CAS would do a great service by publishing the results of a questionnaire sent to each candidate. It could be brief, asking candidates to state why they are running and asking them for their thoughts and positions on what they view as the two most important issues facing the CAS. Perhaps, the Actuarial Review could even publish this ahead of the election in its August issue. Maybe then we can move beyond a beauty contest to an election based on real knowledge.
Bill Carpenter, FCAS
The Ethics of Gifts
While it is true that an actuary must diligently avoid an impression that his results can be "bought" with a higher compensation level, it is ostrich-like to assume that we can build an absolute barrier. An actuary who consistently produces results unfavorable to his client will find that the client retains a new actuary. In the given example, how is the gift of a trip to Hawaii (assume value of $5,000) different than retaining the actuary for a new assignment at a compensation level $5,000 above the "fair market value" for such an assignment? The facts as stated contain no hint that there was any prior indication that the gift was contingent on results. If we take the position that we can investigate incidents like this, then we must in effect concede that every compensation arrangement between an actuary and a client must be scrutinized to be sure the compensation is "fair." Taking it to the next level would require a blind bid for every consulting assignment, lest an actuary ever even consider that his results in the present assignment might affect his receiving the next one.
One point that is significant, however, is that the article does not specify whether the consulting actuary is self-employed or employed by a consulting firm. If the actuary is employed by a firm, then the gift should have been made through the actuary's firm. The client should have paid the firm an amount above the agreed fee with a "strong suggestion" that the firm reward the actuary for exceptional service; I doubt that any employee who made a client that happy would be viewed in an unfavorable light. If the actuary is self-employed then, in my opinion, the gift is not objectionable.
Hank Youngerman, FCAS