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From the Readers

ASB Thanks CAS

Dear Editor:

I would like to offer my thanks to the Casualty Actuarial Society and its members for their support and commitment to the Actuarial Standards Board (ASB). Perhaps more than any other actuarial society, the CAS has been proactive in helping shape the standards of practice for the U.S. actuarial community. Let me offer just a couple examples.

Over several years, the proposed standard on statements of actuarial opinion regarding loss and loss adjustment expense reserves generated a lot of interest among casualty actuaries. The ASB received enough comments both before and after the prescribed comment period that we felt a public hearing would help us more clearly understand the many positions that had been espoused in the comments. The CAS graciously allotted us time and space at your 1999 general membership meeting for the public hearing. Several CAS members made comments at the hearing and many more CAS members took time out of their schedules to attend and listen. Most of the input received was accepted and the result was a better final standard.

Earlier this year the ASB revised its handbook. The handbook is primarily an internally focused operations guide. The Casualty Operating Committee of the ASB took it upon itself to review the new handbook and suggest further changes. Again, the initiatives of the casualty actuaries will result in a better final product.

Lastly, I would like to thank some individual CAS members for their efforts. Phil Ben-Zvi and David Hartman were stand out members of the ASB for many years. They represented the interests of casualty actuaries expertly and tirelessly. Mike La Monica and Karen Terry are now stepping into the casualty positions on the ASB, while Bob Miccolis assumes the chair of the Casualty Operating Committee. My thanks to each of them and to the CAS as a whole for a job well done.

Alan Stonewall, Past Chairman, Actuarial Standards Board

Joint Exams Support Objectives

Dear Editor:

In the August 2000 Actuarial Review, Sholom Feldblum initiated the public debate on Exams 3 and 4. In last November's AR, I published a statistical analysis of Exams 3 and 4. This was followed in February's AR by a call for restructuring Exams 3 and 4 by Stephen P. D'Arcy and Richard W. Gorvett. The debate continues.

D'Arcy and Gorvett state that Exam 3 overemphasizes life contingencies and call for restructuring the exams "to avoid concentrating on material that favors one specialty over another on a joint exam." Let's examine the extent to which the joint exams favor one specialty over another. The tables below provides pass ratios for all the joint exams over the past three sittings.

Exam 1
Date CAS Workers All Workers Difference
Nov. 2000 28% 31% 3%
May 2001 20% 28% 8%
Nov. 2001 34% 30% -4%
Exam 2
Date CAS Workers All Workers Difference
Nov. 2000 30% 28% -2%
May 2001 25% 28% 3%
Nov. 2001 28% 34% 6%
Exam 3
Date CAS Workers All Workers Difference
Nov. 2000 20 29% 9%
May 2001 33% 38% 5%
Nov. 2001 34% 36% 2%
Exam 4
Date CAS Workers All Workers Difference
Nov. 2000 30 33% 3%
May 2001 35% 38% 3%
Nov. 2001 39% 39% 0%

Some observations:

We should not restructure Exam 2 because of these statistics. This exam covers finance and economics and I believe that all actuaries need a stronger education in these fields. My point in bringing up the Exam 2 statistics is that we have to go beyond the statistics and look at our overall objectives.

The CAS does have a policy on joint examinations. This policy encourages joint exams whenever the actuarial organizations have "comparable learning objectives." I strongly support this policy. Both students and employers benefit from having as many joint exams as possible. Students will have a greater choice of employers. Employers of casualty actuaries in particular, will have access to a far greater pool of students. More joint exams will allow more time for everybody to find the best fit. In other words, everybody wins.

A qualifier in the above argument is the phrase "comparable learning objectives." For example, I see no need for life actuaries to learn the casualty insurance policy forms. Nor do I see a need for casualty actuaries to learn about the equivalent material about life insurance products. The CAS begins to put this material in our Exam 5. The SOA should be able to put its specialized material in its Course 5.

Life contingencies has been part of the CAS Syllabus since the CAS was founded in 1914. I do not believe that the material on Exams 3 and 4 places the casualty actuarial student at a serious disadvantage. The structure for dealing with the problems we do have is already in place. We should utilize this structure and preserve the advantages to all that our joint exams provide.

Glenn G. Meyers, FCAS

Academy Has Unity Role

Dear Editor:

After reading the CAS/SOA unification discussion in the last issue of The Actuarial Review, I wish to offer another perspective. As chair of the External Communications Committee, my first and foremost duty is to promote the Casualty Actuarial Society and its Communication Plan. For those unfamiliar with the Plan (or the idea the CAS has one), it can be found on the Web Site. CAS members crafted that Plan. When you read through the Plan, however, it mentions a body that neither Mango nor Mahon seems to address: The American Academy of Actuaries.

The American Academy of Actuaries is the major governing body for actuaries practicing within the United States. While the CAS and SOA (the learned Societies) have their own Statements of Principles, Exam Structures, and ideologies, the Academy (the public interface) provides the Standards of Practice, the requirements for Statements of Opinion, and communications to governmental entities on actuaries' behalves, and facilitates counseling/discipline for those who need it.

Should nonmembers of the CAS or SOA wish to practice in a specific actuarial area, the Academy can certify them in an area if it feels they are qualified to practice in it. This is made possible because of the agreed-to structure of the Academy. The Academy has many of the features Mr. Mango would like in his united world, while providing the inherent differences and freedoms expounded by Mr. Mahon. The current structure is not perfect nor encompassing enough for utopia, but it appears to complement our two Societies at this time.

The conversations that are taking place today are as cyclical as the pricing market or the M&A activity of the financial world. These dialogues will continue as long as many members hold myopic views. The issues will not be solved by either combination or isolation; but in working together to make the AAA more of the ideal to further complement both Societies. Hopefully in the process, synergies will be found such that the issues both Societies face today can be alleviated.

Please note, the views I express in this letter are neither that of the CAS nor that of the External Communications Committee.

William R. Wilkins, FCAS, MAAA

A United Actuarial Publication

Dear Editor:

We are writing this letter as six recipients of the Dorweiler or Woodward-Fondiller Prizes over the past six years. Five years have passed since the CAS Board of Directors declined the SOA's invitation to the CAS to serve as a joint sponsor of the North American Actuarial Journal. We believe it is now time to reconsider that decision.

We certainly value CAS publications as a forum for casualty actuaries. However, many topics cross practice areas. Such topics include financial issues like asset-liability management; accounting issues like fair value; market issues like elasticity of demand for insurance; statistical issues like copulas; and broader issues like enterprise risk management. Having researchers from both Societies learn from each other's efforts in such areas would benefit both groups—as would having practitioners see the work done in both Societies.

Because of the many crossover issues, we feel it is important that there be a North American research publication that actuaries of all stripes can call their own. We do not believe that CAS sponsorship of the North American Actuarial Journal would threaten CAS publications, since many other issues remain primarily of interest to casualty actuaries.

With the CAS as a joint sponsor of the North American Actuarial Journal, we would expect CAS members to be involved in the refereeing process and in setting editorial policy. We would also expect all CAS members to receive automatic subscriptions.

We urge the leaders of the CAS to begin discussions with the leaders of the SOA with the goal of instituting joint sponsorship of the North American Actuarial Journal.

Clive L. Keatinge, FCAS
Glenn G. Meyers, FCAS
Gary G. Venter, FCAS
Leigh J. Halliwell, FCAS
Donald F. Mango, FCAS
Stephen J. Mildenhall, FCAS