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Readers Respond to May Editorial

Dear Editor:

There has been a great deal of discussion about the prospect of the SOA swallowing up the CAS, but this really represents two issues, not entirely dependent. The first is organizational: whether we are members of the SOA or the CAS or both. The second and more important issue is who controls the granting of casualty credentials.

Who grants credentials need not depend on the organizational structure. The pension actuaries control enrollment with their own exam(s) and their own recommendation requirements, despite generally being members of the SOA, as well. A strong argument can be made for the Casualty Actuarial Society (or its successor group) as credential-granters. Casualty practice is quite different from life practice, much more so than pension practice. A life actuary who passed parts 6 and 7 would not be as qualified as a casualty associate unless he had casualty experience.

The CAS already requires a recommendation to become a member. I propose that the requirement be expanded to state that the candidate has at least two years of relevant casualty experience, as recognized by a recommender who is himself experienced with casualty work (preferably a member of the CAS). This is parallel to the pension situation, which requires three years of responsible pension experience in addition to enrollment exams. If a few rapid exam-passers are slowed by this requirement, it is probably for the good. It makes it clear that we, as an organization, recognize that casualty practice is not (and cannot be) entirely covered by the exams. It emphasizes the primacy of casualty actuaries in certifying new casualty practitioners. It is consistent with the apprenticeship paradigm of actuarial certification. It would also place an entirely legitimate and appropriate barrier in the path of an ASA or FSA who wanted to go into the casualty business with nothing but a couple of extra exams under his belt.

Would this prevent the SOA from certifying a new breed of "casualty actuaries?" I don't know, but it would lend credence to our cries of "malpractice" if we require experience in our own.
Ginda Kaplan Fisher, FCAS

Dear Editor:

I would like to second the thoughts expressed by Mr. Van Slyke in the May issue of the AR in which he explains that the NAAJ is designed to appeal to actuaries of all disciplines, whereas the Proceedings are primarily directed at casualty actuaries. I believe these two journals will complement one another rather than compete with one another. Most disciplines have a number of refereed journals, each with a somewhat different orientation. I believe that the casualty specialty within actuarial science is vital enough to support more than one journal with casualty content.

I do find it disturbing that the CAS leadership found it necessary to protest the solicitation of members of the CAS for articles for the NAAJ. When I have a paper to contribute to an actuarial journal, my decision as to where to submit it will be based on where I believe it will reach the largest audience to which it would be of interest, not on political considerations.

I also find it disturbing that Mr. Van Slyke's letter was buried on pages 10 and 11 of the May issue of the AR whereas Mr. Khury's opposing view was prominently displayed on page 2. I believe it would have been appropriate for Mr.Khury, as Editor-in-Chief, to place Mr. Van Slyke's letter adjacent to his own editorial to preserve some sense of balance. This is especially true in light of the articles by Mr. Anker and Mr. Feldblum on page 1.

Finally, I would like to express my consternation over the inflammatory rhetoric used by Mr. Khury in his editorial. I have worked with SOA members and staff for over five years on one of the joint CAS/SOA examination committees. I have always found them to be very forthright and professional, bearing no resemblance to the conniving trapper in Mr. Khury's editorial. The CAS and SOA have much in common, and it is imperative that we work together for the betterment of the profession. Given the widely varying views on important issues within both the CAS and the SOA, this is going to be a difficult process. I urge the leadership of the CAS (and SOA as well) to stick to the substance of the issues at hand and to resist the temptation to engage in counterproductive attacks when things do not go smoothly.
Clive L. Keatinge, FCAS

Dear Editor:

As an active and proud member of the CAS, I read the May AR with disappointment and dismay.

I don't have any more appropriate response than to quote Pogo: "I have seen the enemy and it is us."
Robert L. Brown, ACAS, FSA, FCIA

Dear Editor:

I just read the editorial of the May AR and just have to let you know how much I admire and appreciate the courage of the AR to say in clear and unambiguous language what many members of the CAS have felt for a long time. I served for seven years on the AERF Board and in the process heard, on numerous occasions, how the SOA leadership was plotting and spoiling to eliminate the AERF since it is a rival organization to the research activities of the SOA. The members of the AERF Board, most of whom were SOA members, were alarmed and incredulous at the attacks since the SOA was one of the founding organizations of AERF!

I want you to know that I agree unreservedly with the views articulated in your editorial and support the effort to again stave off the wolf from our door. My wife is Lithuanian, and when I told her about the editorial, she quickly pointed out the similarities between this situation and the treatment of Lithuania by the former Soviet Union. And this reminded me that the SOA sent a contingent of SOA members to Russia to offer their assistance in forming a Russian actuarial society. The CAS, to the best of my knowledge, was not consulted nor was it referred to as having anything to offer the Russians in the way of actuarial education. I know about this as I was teaching at Moscow State University that summer.

I am nauseated by the crass arrogance of a group that would be the first to wail and froth as the mouth if a rival organization tried to step on their "turf." Can we ever rest? I think not - or we'll all be speaking Russian!
J. Gary La Rose, FCAS, FCA

Dear Editor:

The beat goes on. When I first served on the CAS Board of Directors, more than ten years ago, the beat was "Strengthening the Profession." It was common to refer to this as "unification," but analogies to the Moonies and references to the likely true nature of the activity caused selection of a more elegant moniker. Although at that time it was decided that restructuring the American Academy of Actuaries and a few other changes would serve to strengthen the profession without the immediate need to join together the CAS and the SOA in a single learned society, the beat continued as one sees from the facts contained in the May 1997 editorial.

Recently a joint committee of the SOA/CAS released a draft of "General Principles of Actuarial Science," an item not listed in the editorial, but which runs with the nature of the listed items. (My comments on these principles are contained in a letter to the CAS Committee on Principles and are not contained in this letter in any detail.) The genesis of these principles was a similarly titled (and later withdrawn) draft work written by the SOA that was intended to cover all actuarial science. I am not aware of any membership force within the CAS that cried out for the creation of these general principles. The SOA invited the CAS to participate in its second attempt at general principles.

Of course, these SOA actions may be just so much paranoia on the part of the CAS unless one can identify a possible motive. That motive may just lie in the implications of the formation of the International Forum of Actuarial Associations. At its organizing meeting, a common code of conduct was presented as the unifying basis for the formation of the IFAA. Now, however, it seems that the basic education of actuaries is part of the agenda of the IFAA and, since the U.S. stands alone among nations as having a separate actuarial organization for each basic area, the SOA may be more interested in unification.

The draft principles together with the items listed in the editorial may be interpreted by some as attempts simply to organize better the actuarial profession as a whole - a benefit to the CAS and SOA alike. But there are too many individual comments that make me concerned about the nature of the activities. In the early 1990s, an SOA president, in his presidential address, spoke of a desire to have a single actuarial society. Another SOA president suggested at a meeting of the Council of Presidents in 1992 that the SOA should co-sponsor all the CAS seminars and meetings, including the CAS Annual Meeting.

Each separate action seems somewhat well-intended, and each comment taken individually seems like the opinion of just one SOA member. But I am reminded of the Hungarian communist leader Rakosi who coined the phrase "salami tactics" to describe how almost any political aim can be achieved if one does not greedily swallow the sausage whole, but slices off one bit after another.

If, in fact, the CAS leadership decides to go down a joint path with the SOA, I am hopeful that it will do so only because we members believe we will be better served this way. I sincerely hope that any lack of comment or action by CAS members is not interpreted as implicit sanction for continued activity in this direction.
Irene K. Bass, FCAS, FCIA

Dear Editor:

In the May 1997 AR, CAS President Robert Anker again addresses the issue of the NAAJ. He notes that one of the events leading the CAS Board to protest to the SOA was a direct telephone solicitation of papers for the NAAJ from "CAS authors."

The NAAJ has not solicited me, though I would be flattered to receive a call. No doubt they are soliciting papers only from the best known, highest quality CAS members. But the apparent attitude underlying Mr. Anker's comments is a greatly disturbing commentary on the leadership's attitude towards CAS members. CAS members are not owned by the Society. We are not "CAS authors" who are under contract to work only for the CAS. Authors have chosen to advance casualty actuarial science by publishing in CAS journals. This does not mean they have pledged to restrict their work to CAS journals.

The CAS is a professional organization that exists to serve its members and to advance casualty actuarial science. If we are concerned about advancing our profession, we should be delighted to have an additional outlet for our work. Instead, we are concerned that the new journal will be so successful that no one will read our journal.

Stan Khury's accompanying editorial claims the SOA could be accused of professional misconduct because the NAAJ represents an intention "to practice in an area in which it has no qualification, training, or experience." [Emphasis in the original.] Alas, Mr. Khury overestimates what it takes to run a journal. The editors of academic journals are rarely experts on all the papers in their journals. All they need is to be able to find expert reviewers for articles, and in the case of the NAAJ, it's pretty clear where they should look.

This whole saga seems to me to smack of fear of competition. We preach the virtues of competition in the marketplace, but we don't want competition for our Society. Let us remember the virtues of competitive marketplaces - the rivalry that leads all parties to improve the quality of their products, the weeding out of the inefficient, the growth of knowledge. If we care about advancing our discipline, competition is what we need.

Mr. Khury, in his February 1997 AR editorial, pointed to the principal functions of the CAS, as articulated by our Board of Directors: 1) Education; 2) Membership services; 3) Research; and 4) Public interface, which is delegated to the AAA. None of these has anything to do with avoiding competition, or shying away from other actuarial bodies. Indeed, even the Board's definition of a "Casualty Actuary" as a professional skilled in certain areas says nothing about a casualty actuary necessarily being a member of the CAS.

So why don't we embrace competition? Yes, competition is tough. Maybe we'll have to tighten our standards; maybe our service to our members will need to improve; maybe the quality of our education system will have to rise. But shouldn't we welcome improvement?
Gary Blumsohn, FCAS

Dear Editor:

The May AR presented a very unbalanced view of the CAS/SOA relationships. In addition to the "Editorial" and the "From the President" columns, the editor chose to include three items on the topic of CAS/SOA relations - the Feldblum article and two letters to the editor. Two of the three items had a perspective consistent with the editorial. The third item, the Van Slyke letter, was inconsistent with the editorial, and, even there, the editor inserted a 'correction,' which I believe to be only partially correct, to deflect some of the points of that letter.

CAS members may know that the AR is controlled by the editorial staff without oversight by the CAS Board or officers. However, the AR is the newsletter of the CAS. We must expect that our publics will interpret editorials and the overall tone of the newsletter as being consistent with the policies of the CAS. The view presented in your May editorial and the overall tone of the May AR were totally inconsistent with the position of the CAS.

The AR is read not only by CAS members, who might understand the distinction between the AR and the CAS, but also by others who will not have that background - students already working as actuaries, students still in university, regulators, actuaries in other societies, and (through the Web site) the entire world.

I encourage the CAS Board to take the action required to make sure that the editorials in the CAS newsletter are not used to express views that are inconsistent with the views of the CAS Board. Free speech belongs to the members and can be expressed in many other parts of the AR.

Next, let me consider the content of the editorial.

Metaphors are powerful rhetorical devices. Reference to trapped hogs led to the slaughter is an effective rhetorical device. However, it is not a realistic analogy to relationships between casualty and non-casualty actuaries.

The actuarial organizations in the U.S. are more like Siamese twins. We work for the same employers, we attract students from the same pool of candidates, we interact with the same state and federal regulators, we "compete" for employment with the same groups of non-actuarial professionals, etc. None of the organizations can do anything to "hurt" another organization (or its members) without at the same time harming itself.

Your description of events surrounding the NAAJ and the SOAF was necessarily abbreviated, but looked only on the "dark side" of events. I saw those events quite differently.

The SOA you criticize is the same organization that helped establish the AAA, giving the CAS disproportionate control, helped establish the first CLRS through the AAA when the CAS barely had the capabilities to do so, founded and supported the AERF, again giving the CAS a disproportionate role, provided much of the energy to fight the battle against making accountants loss reserve specialists, and so on. In thirty years of "corn spreading" they haven't yet fenced us in.

Obviously, the organizations will not do the right things all of the time. The organizations will annoy each other, disagree, and quarrel with some degree of regularity. The point is to recognize that in the end common sense will prevail and in the meantime keep the rhetoric and global "attacks" under control. Let's leave negative campaigning to the politicians.
Allan Kaufman, FCAS

Dear Editor:

I was recently sent a copy of the May 1997 issue of the AR, and was distressed at what I read, particularly the editorial by Stan Khury and the article by Sholom Feldblum. I also read the article on the CAS leadership meeting held in Philadelphia, and that did not give me any additional comfort.

I am a past president of the Canadian Institute of Actuaries, and as such served on the Council of Presidents from 1988 to 1990. I practice in the pension and benefits area, and qualified through the U.K. Institute of Actuaries. I am an Associate of the SOA, but never wrote any of its exams, and feel no strong attachment to it. I am also a Fellow of the Conference of Consulting Actuaries, and served on its Board from 1991 to 1994.

I have served with casualty actuaries on the CIA Council and committees, the Council of Presidents, the CCA Board, and in consulting firms in which I was formerly a principal. I have a great deal of respect for casualty actuaries, but I am afraid that their leadership is doing them a disservice. Mr. Khury uses the example of wild hogs, but, to be blunt, what I saw in the May 1997 issue was much more akin to ostriches with their heads in the sand.

The strength of the profession in Canada lies, among other things, in the fact that it is a united profession. This is true of the profession elsewhere in the world, including the U.K. (the Faculty and Institute have always cooperated well with each other and are moving very close to each other), Australia and South Africa. The major weakness of the U.S. actuarial profession is that it is divided, and to the outside world no one really knows who the actuarial profession is in the U.S., or who represents it. I suspect this is even true of people in the U.S.

The actuarial world is moving towards a system where to be an actuary will require knowledge in all areas of practice, including casualty work. One then relies on the integrity and professionalism of the individuals involved as well as the discipline process to ensure individuals do not practice in areas in which they are not qualified to practice. The only professional organization that seems to be resisting this trend is the CAS.

With respect, much as I have empathy with your desire for independence, I think it is naive, misplaced and short-sighted. In the end, the world is going to pass you by.

I think casualty actuaries in the U.S. can be a significant force within the profession and throughout the world by joining with the profession. (My own view is that the SOA should adopt the purpose of the Foundation as its sole purpose, CAS should become a section of the SOA, and the CCA should merge into the Pension Section of the Society. I argued for the latter when I was on the Board of the CCA, with the encouragement of a number of the then leaders.) I believe that, by doing this, casualty actuaries in North America will retain the status and significance that they should have. I believe that failure to do this will see the world leave you behind, and you will thereby lose status and significance. That would be a real shame.

Why is this any of my business? The worldwide actuarial profession is too small to be divided, and it is only as strong as its weakest part. One of the major weaknesses of the actuarial profession is lack of integration and cohesiveness of the profession in the U.S. Not only does this weaken the profession in the U.S., it weakens the profession everywhere. Simply stated it saddens me to see you doing this to yourselves, and in the end I believe we will all be the losers because of it.

I sincerely hope that the CAS will reconsider its position.

I wish you well.
Peter C. Hirst, FCIA, ASA, FCA, FIA

[Editor's note: The following letter was sent to the SOA membership on June 4, 1997.]

The May 1997 issue of the AR published by the CAS included some strident articles on the relationship between the CAS and the SOA. I consider it most unfortunate that our good faith efforts to work together with the CAS are being misinterpreted by some individuals. We consider the accusations serious, even if farfetched.

NAAJ. Originally, we invited the CAS to be joint sponsors of the NAAJ. The CAS decided not to participate because of concerns that the NAAJ would be in competition with the CAS's own scholarly journal. We feel it would be beneficial to CAS authors to publish in the NAAJ because of the NAAJ's wide circulation and promotion within the international actuarial community, to academia and to allied professionals in finance and economics. We hope that CAS members will find articles of benefit, especially in such areas as health, disability, finance and investment where there is an overlap in topics of interest. In fact, in the first issue there was an article on the use of derivatives by insurance companies that included data from both life and P&C companies.

In his May '97 editorial "How to Catch a Wild Hog," C.K. "Stan" Khury, Past President of the CAS and Editor-in Chief of the AR, calls into question the SOA's professional integrity because of our intention to include articles on all aspects of actuarial science, including casualty. However, the NAAJ was intended to include coverage comparable to other world class actuarial publications such as The Scandinavian Actuarial Journal, the British Actuarial Journal published by the Institute of Actuaries and the Faculty of Actuaries, and the IAA Quarterly Journal of the Institute of Actuaries of Australia. The ultimate basis for judging the NAAJ will be the articles we publish. There is casualty expertise on the editorial board of the NAAJ, and I have every confidence that our review process will meet the highest professional standards.

The AERF and the SOA Foundation. Khury also questions the role and intent of the SOA in the possible merger of the Actuarial Education and Research Fund (AERF) and the SOA Foundation. The AERF was organized by the North American actuarial organizations in 1976 and the SOA Foundation was established in 1994. The SOA's contribution to the AERF over the years has been the provision of administrative services and staff support, including the Executive or Administrative Director.

The AERF has not been generally successful at large fund raising efforts. As of December 31, 1994, the AERF had unrestricted assets of about $25,000 and total assets of about $480,000. After nearly 18 years, this cannot be considered spectacular growth by the AERF. (Note that as of December 31, 1996, the AERF had unrestricted assets of about $53,000 and total assets of about $1,150,000; the increase being primarily due to the new Memorial Fund for the late James C.H. Anderson which was principally negotiated by the SOA liaisons to the AERF.) Approximately 95 percent of the AERF's assets at the end of 1996 have been contributed by or on behalf of eight specific individuals.

The AERF has been a noble experiment and has done many good things within the bounds of its limited resources. The actuarial organizations that sponsor AERF have provided limited funding for some excellent education and research projects, but it was not done on a scale comparable to what was intended for the SOA Foundation. The lack of organizational support and critical mass were undoubtedly factors in the SOA decision to establish its own foundation in 1994 rather than just make a large grant to the AERF. The SOA Foundation was established with a grant of $500,000, a matching grant pledge of an additional $500,000 and a commitment to contribute administrative and fund raising support. The SOA Foundation is a separate corporation from the SOA; it has an independent Board of Trustees and its own Bylaws. Whether or not there should be a merger is between the AERF and the SOA Foundation rather than the CAS and SOA.

Examinations. A key element in the relationship between the CAS and SOA is the joint sponsorship of examinations. In January, we believed we had reached an agreement to establish a framework for joint sponsorship of four of the first six exams on the new syllabus. This was based on a syllabus mix that was a compromise for both organizations; there was more on contingencies than the CAS wanted, more basic statistics than the SOA wanted, and probably more of both than the students wanted. As detailed development of the courses progressed, the CAS became unwilling to accept the terms of the January agreement; they wanted more basic statistics than agreed upon and much less on contingencies than we could accept. Unfortunately, it appears that there will be joint sponsorship of the first two exams only.

The Outlook for the CAS. In his May '97 article "Cassandra of the CAS," Sholom Feldblum, a CAS Board Member, discusses the concern that one day the SOA will decide to "graduate casualty actuaries." However, such pressures come not so much from the SOA directly as from the fact that the world outside the U.S. perceives casualty as a practice area rather than a separate science. The Institute and Faculty of Actuaries in Great Britain and the Institute of Actuaries of Australia include general insurance practice as a routine part of their actuarial syllabus. The Canadian Institute of Actuaries insists that all FCIA's study both life and casualty topics as part of their education. The most serious challenge comes from the International Forum of Actuarial Associations (IFAA). The IFAA is discussing standards for qualifying actuarial education programs, which will ultimately require that actuarial education cover both life and casualty topics. It is inconceivable to me that the SOA will have an education syllabus which is not in compliance with IFAA requirements; if we are not able to provide this material through jointly sponsored examinations, we will be forced to seek other alternatives.

By nature, I am a consensus seeker, and I suspect that the vast majority of CAS and SOA members think there is more to gain by cooperation than confrontation. However, the articles in the May 1997 issue of the AR are clearly confrontational. The CAS leadership's declaration of independence in its new strategic plan may force the SOA to act independently to implement its goals, even though we would prefer to act more cooperatively. As Khury claims, a fence is being built, but it is being built by the CAS.
David M. Holland, FSA
President, SOA