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CAS Members Discuss Mutual Recognition
by Arthur J. SchwartzThe CAS Task Force on Mutual Recognition (created in 1998) submitted a report dated January 2000. Basically, the report recognized the difference between practice rights and credentials. The task force noted that there is no barrier to practice for foreign actuaries wishing to do so in the U.S. and Canada. Foreign actuaries can readily obtain practice rights, which are granted by the American Academy of Actuaries (AAA) and Canadian Institute of Actuaries (CIA). Therefore, there seemed little to be gained by granting mutual recognition of credentials, since credentials in North America do not determine practice rights. CAS members also experienced little or no barrier to practice outside North America. Thus the task force recommended NO to mutual recognition, but YES to making it easier for truly qualified actuaries from other countries to practice in the U.S. and Canada. The task force also recommended that the CAS consider waiving certain exams, making it easier for qualified actuaries to gain the CAS credentials by examination.
Events over the next two years, however, caused the question to be reopened. A new CAS Mutual Recognition Task Force (created in 2001) submitted a report, dated August 2002, recommending a reversal, in part, of the previous position.
Joining The Actuarial Review in a discussion of mutual recognition are:
Mary Frances Miller, with Select Actuarial Services, a consulting firm in Nashville, Tennessee. Mary Frances is president-elect of the CAS, chaired the 1998 Task Force on Mutual Recognition, and served as a member of the 2001 task force. She is the CAS delegate to the Education and Accreditation Committees of the International Actuarial Association (IAA) and has represented the CAS in a working party that brings together members of the CAS, SOA, Faculty and Institute of Actuaries (U.K.) (the "Institute"), and the Institute of Actuaries of Australia (IAAust) to discuss common education issues.
Nolan Asch, principal-reinsurance, with ISO in Jersey City, New Jersey. From 1984-95, Nolan was chief actuary for SCOR Re, a major global reinsurer. Before that, Nolan was vice president in charge of Global Casualty underwriting for AFIA Worldwide. These are positions with extensive international experience.
Scott Bradley, managing director, Financial Services Business Group, Swiss Reinsurance Company in Bermuda.
Walter Wright, principal with Mercer Risk, Finance, & Insurance Consulting, in New York City. Walter worked in London for several years in the early 1990's, and continues to do some international work today.
Our discussion follows:
AR: Earlier this year, the CAS Board of Directors decided to pursue some form of mutual recognition (MR) with certain other actuarial societies outside North America. Let's begin by asking Mary Frances and Walt what the term "mutual recognition" means in the context of the board's vote.
Mary Frances: Mutual recognition is an agreement between two actuarial organizations to allow for cross-membership for their members. In essence, if two organizations have a mutual recognition agreement, then Fellows of each organization are eligible to become Fellows in the other organization. All mutual recognition agreements have restrictions on who is eligible for mutual recognition of membership. For example, significant Canadian practice is a requirement under the CIA's mutual recognition agreements. The Board has endorsed the concept of mutual recognition agreements that would be restricted to Fellows who have completed their society's property/casualty exams and who have significant practice experience in the property/casualty area.
It's important, also, to define what mutual recognition is not. Mutual recognition is not an open door for unqualified actuaries to practice outside their training and qualification. All societies that are members of the IAA have codes of conduct similar to the CAS code, and all require that members practice only when qualified to do so. In addition, countries with strong regulatory frameworks have specific qualification standards that apply when actuaries sign opinions related to insurance company solvency. For example, appointed actuaries in Australia must not only be Fellows of the IAAust, they must also be residents in Australia and have a minimum of three years of Australian experience. CAS members who sign statements of opinion for NAIC annual statements in the U.S. must have taken the U.S. nation-specific exam and must have three years of reserving experience supervised by an actuary who is qualified to sign NAIC statements of opinion. An FCAS who joins the IAAust through mutual recognition, or an FIAAust who joins the CAS through mutual recognition, would not be instantly qualified to sign anything. They would both still have to meet the qualification standards, both educational and experience, before venturing to practice in a new jurisdiction.
Walter: I can tell you what mutual recognition means to me, but I am not involved with the board and do not know what it means in the context of the board's vote.
To me, mutual recognition simply means that other actuarial societies will recognize the expertise of Fellows of the Casualty Actuarial Society and will extend membership privileges to us. The CAS will respond similarly. From a practical point of view, I do not think that this will impact very many people. From a strategic perspective, however, I think it is an important step for the CAS to take toward recognition that we are a worldwide organization, not merely a North American organization.
Currently, no CAS members are qualified to sign a statement of actuarial opinion for a captive insurance company based in Dublin. That is annoying to any CAS consulting actuaries, in the United States and elsewhere, whose clients may have captives in Dublin. Unfortunately, this is likely to be repeated, as more countries require statements of actuarial opinion. All CAS members, whether or not they do any work in other countries, should be eager to fix this embarrassing situation.
Some members have argued that it is the American Academy of Actuaries that should grant mutual recognition, not the CAS. This idea sounds good on the surface, but it has been considered in the past and will not work, apparently because membership standards for the Academy are so lax that other actuarial societies do not want to reciprocate with the Academy. If there were a chance for this to work, then the CAS should be vigorously pursuing MR by the Academy. However, we should not sacrifice the possibility of MR on the principle that it should only be granted by the Academy. Otherwise, long-term, the international role of the CAS will be marginalized.
AR: Additional comments, anyone?
Nolan: To me, the mutual recognition concept means bartering all or a portion of the value of our FCAS designation in the U.S. in return for reciprocal recognition from a foreign actuarial society. It is a loss of our sovereignty and a loss of control of our destiny. It made no sense to me before 1999. I think the CAS Board made the proper decision then, and it makes no sense to me now. In fact, approximately 13 years ago I thought the CAS made a horrible decision when it ceded authority for signing loss reserve opinions to the AAA. Slowly our autonomy is being eroded. The amazing part is that the CAS has been a party to it.
Scott: The concept of mutual recognition, at least between the CAS and the Institute, has absolutely nothing to do with practice rights. Mary Frances is correct when she says that MR would not be an open door for unqualified actuaries to "practice" outside their training and qualifications. At its simplest, any company can hire any individuals to perform any jobs that the employer wants them to do, with few exceptions. This holds true whether or not the individual in question has any actuarial credentials. In the actuarial world there are a few exceptions, commonly referred to as practice rights, and generally relate to signing things such as loss reserve opinions. The ability to sign such documents in the U.S. or Canada is controlled by the American Academy or Canadian Institute respectively, NOT by the CAS. I do find it somewhat disconcerting that the question of mutual recognition between the CAS and the Institute is regularly confused with the question of practice rights. The two are not the same.
Currently members of the CAS willingly become members of the American Academy in order to obtain practice rights in the United States. To gain practice rights, an FIA will still have to become a member of this "lax" organization. If the American Academy is not acceptable to the Institute of Actuaries and other actuarial organizations, then this is their problem, not that of the CAS.
AR: The Mutual Recognition Task Force conducted a survey of CAS members, then issued a report to the CAS Board that summarized the results and made recommendations. (Both the "Survey on Value of CAS Membership in the International Marketplace" and the Mutual Recognition Task Force Report are available on the CAS Web Site.) Were you surprised by any of the survey results or by any of the task force conclusions or recommendations? Scott and Nolan, why don't you start?
Scott: I was not surprised by the survey results. Very few respondents seemed to feel that their career had been hurt in any way by the lack of mutual recognition. While I did not count exact numbers, I would estimate that at most something in the order of 5 percent to 10 percent of respondents even appeared "neutral" on the subject. The remaining respondents were strongly polarized against mutual recognition. It would appear that the vast majority of those who responded are opposed to the idea.
Very few individuals (perhaps one percent) indicated that they had been harmed by the lack of mutual recognition. Frankly, as someone who has spent the majority of his professional career outside of North America, I would have been surprised if the answer had been different. I have worked with major multinational insurance, reinsurance, and consulting firms and I can confirm that the FCAS designation is in high demand both inside and outside North America.
However, I was extremely surprised by the task force conclusions and recommendations. Not only are they a reversal of the conclusions reached in 1999 when this topic last reared its ugly head, but those conclusions are completely inconsistent with conclusions reached by the Education Policy Committee (EPC). When the decision was reached not to pursue mutual recognition, the EPC was asked to consider the option of granting waivers for CAS exams based on equivalent Institute exams. After reviewing both the syllabus material and the exams, the EPC concluded that not only does the Institute not test their syllabus material to the same depth as the CAS does, but the Institute's syllabus material itself is not at the same high level as the CAS syllabus material. As a result of this analysis, the EPC formally recommended to the board that no waivers be granted beyond the first four exams. I do have to point out that the review in question was of the new Institute syllabus (implemented in 2000), which contains significantly more casualty material than the old syllabus—the old syllabus was mostly life and pension-related with at most two property/casualty exams. As a point of fact, those two exams were introduced relatively recently and an FIA who has taken no property/casualty exams is still free to practice in the non-life area.
Nolan: I was not surprised by the survey. Those actuaries who practice the most internationally seem to feel the least need for mutual recognition. As a key example I would cite CABER (Casualty Actuaries of Bermuda), active in Bermuda. They have the most global practice. They have gone as far as to circulate petitions in the past on this subject violently opposed to the mutual recognition proposition.
AR: Walt and Mary Frances, how about you? What surprised you in the survey results or the task force report?
Mary Frances: I'm not surprised by the survey results. Mutual recognition would have very little effect on current members of the CAS, and probably very little effect on future members who practice solely in the U.S. and Canada or in jurisdictions where the CAS credential is already acknowledged. The biggest impact of mutual recognition will be on candidates outside the U.S. and Canada who want to join the CAS but are effectively prevented from doing so because the CAS credential is not recognized in their local qualification standards. It was interesting to note that more than one actuary who supervises candidates outside the U.S. or Canada stated that these candidates are not pursuing CAS credentials. If we have the best system for training property/casualty actuaries, why don't candidates who report to CAS members take CAS exams? Perhaps because if they get a CAS credential, absent mutual recognition, they will be forever outsiders among actuaries in their home country. This is not an issue for ex-pats, like the CAS members who responded to the survey. There is plenty of work for ex-pats, and they don't feel a particular need to join the local organization where they are temporarily posted. So, the CAS as a North American organization is very good at exporting people to work around the world, but it does nothing to advance the development of actuaries who are not from North America.
Walter: Two things really surprised me. First, although CAS members should be concerned that we not recognize actuaries who have not had rigorous training, there seems to be an underlying belief that the CAS is the only organization that has rigorous exams for property/casualty actuarial work. More familiarity with the examinations of the Institute of Actuaries, and with their "graduates," would dispel that notion.
Second, there seems to be a feeling that the exams are not useful if they are not specifically geared toward the laws, regulations, and practices of a specific country. Why do we think that an experienced London market actuary, for example, would not be able to evaluate loss reserves of U.S. companies? Many CAS members work for international reinsurance companies, and clearly they have not been trained in the nuances of each country from which their employer accepts business. Country-specific training is valuable, but the key thing is knowing to ask the necessary questions.
Scott: I should start by refuting a myth. While everyone has personal biases, neither my personal objections to mutual recognition nor any of those that I have heard voiced by others imply that an FIA is not a highly competent actuary, only that their training is different; not better, not worse, simply different.
With respect to the need for country-specific material, the Education Policy Committee actually recommended waiving Exam 7 (7-Canada or 7-U.S., as the case may be) for those individuals who write the remaining CAS exams but are already fully qualified in their local jurisdiction. It is my understanding that this recommendation will not be adopted, at least for jurisdictions where the local actuarial body does not formally examine candidates with respect to the local legal and accounting framework.
AR: This question is for Mary Frances and Walt. What finally motivated the CAS Board's decision to pursue MR with the Faculty and Institute of Actuaries in Great Britain and the Institute of Actuaries of Australia? What goals will MR achieve? What problems will MR solve?
Mary Frances: The first Task Force on Mutual Recognition recognized the need to have greater cooperation among actuarial organizations, but we saw the mutual recognition issue as related solely to practice rights. Because qualification standards in North America are set by the CIA and the AAA—not the CAS—we recommended that mutual recognition be pursued by those societies rather than the CAS. The Canadian Institute has, in fact, executed mutual recognition agreements with the Faculty and Institute in the U.K.. What we didn't focus on back in 1998, however, was that there are issues with the AAA's membership structure that are going to be a permanent barrier to mutual recognition agreements. Most actuarial societies do not classify members who are not Fellows as qualified to practice. There is an Associate membership class in the Institute of Actuaries, but Associates are not qualified to practice. Similarly, ACAS's are not qualified to practice in Canada. Because the AAA insists on a single class of membership for all actuaries, mutual recognition between the AAA and other societies is a non-starter.
The AAA is also unable to speak for CAS members who are not U.S. practitioners. The 1998 task force focused on current American and Canadian members of the CAS and the potential effect of mutual recognition on them. It considered only then-current qualification standards applying to property/casualty insurance actuaries around the world. There were very few such qualifications. It did not consider future members who might not be residents of the U.S. or Canada. Since that task force's report was adopted by the board, the global regulatory environment has changed. Several countries have adopted appointed actuary regulations that apply to property/casualty insurance companies. Now that the World Bank has recognized the importance of actuaries in the supervision of insurance, countries are being pressured to adopt the appointed actuary concept, and we expect that the number of countries requiring actuarial certification in property/casualty insurance will only increase. This should be good news for the CAS, the preeminent resource for property/casualty actuarial education. Surely increased requirements for actuarial involvement in property/casualty insurance should mean an increased demand for our members' services. Not so. In more cases than not, the first criterion for qualification to serve as an appointed actuary for a property/casualty insurance company is membership in the local actuarial organization. The CAS credential doesn't generally qualify candidates to join the local organization, so candidates will have to choose between a CAS education and qualification to practice!
We have also had some significant pushback from actuaries in other organizations. At a time when the number of international accounting and actuarial standards is mushrooming, we want very much to have our opinions and expertise recognized as preeminent. We are very active at the IAA and have significant input into the proposed standards. Although the individual CAS members involved in the committees have been inclusive rather than exclusive in their relations with other organizations, the perception that our Society is arrogant and unwilling to recognize the qualifications of other actuaries has the potential to mar those relationships and lessen our influence.
Walter: I am not on the board, and have no idea what motivated the board to pursue MR with the Faculty and Institute in the U.K. and with the Institute of Actuaries of Australia. Presumably, the board recognized that these professional organizations train highly capable property/casualty actuaries, and by failing to recognize that, we limit the opportunities of CAS members.
AR: Some CAS members have strong reservations about MR. Nolan and Scott, can you share your concerns with our readers?
Scott: I personally have a number of concerns. Perhaps the most basic of these arises from the fact that the CAS and the Institute are fundamentally different organizations. The CAS is the only actuarial body that I am aware of that focuses entirely on non-life insurance. If we believe that somehow makes the CAS "different" from other bodies and we believe the CAS membership somehow benefits from that difference, then why are we contemplating giving Fellowships to someone from a different body? If we don't believe that there is a difference or if we do not believe that the difference is worth anything, why do we spend thousands of hours creating and administering CAS exams? Why doesn't the CAS sit down with the Institute and set common exams? To be honest, I don't like this latter approach but I definitely prefer it to any agreement that would simply see an exchange of designations between the CAS and the Institute. To simply "exchange" definitions without a common exam platform creates two separate, and unequal, paths to Fellowship and dilutes the educational element of the CAS qualification process.
I do believe that much of the problem relates to the tendency to confuse educational qualifications and practice rights. The CAS is an educational body—practice rights in the United States and Canada are controlled by the American Academy of Actuaries and the Canadian Institute of Actuaries, respectively. It is these bodies that should be considering mutual recognition, not the CAS. As a point of fact, the CIA and the Institute do have a mutual recognition agreement of sorts in place—in brief, an FIA can join the CIA if that individual satisfies certain requirements: (1) passes a Canadian content exam, (2) has sufficient Canadian experience, and (3) satisfies the continuing education requirements of the CIA. This approach makes a lot of sense. Mutual recognition in the U.S. should be pursued via the AAA, not the CAS.
Having spent the vast majority of my actuarial career outside of North America, and my entire career working for multinational carriers and consulting firms, I can confirm that the FCAS designation is in demand in Europe and elsewhere. The only restriction that comes with not being an FIA relates to signing opinions in those countries that require an FIA's signature. Even then, an FCAS can become an Affiliate of the Institute of Actuaries which, subject to relevant experience requirements, will allow that FCAS to sign U.K. opinions. However, even this is not necessary. Many companies have large actuarial departments but very few of those individuals actually sign opinions. Companies are free to have their opinion signed by someone who is qualified "locally," whether that individual is a staff member or an independent consultant. (As an observation, the majority of the chief Bermuda companies actually have their opinions signed by a consultant as opposed to an in-house actuary. The resulting independence is actually regarded as a plus by regulators, both here and abroad.) The only restrictions placed on anyone's freedom to work relate to practice rights, which are not controlled by the CAS in any case.
The arguments supporting mutual recognition generally seem pretty weak. I regularly hear statements such as, "We want to be the body that produces non-life exams for places such as India and China, but when candidates in those countries discover that they will not be qualified locally as a result of becoming an FCAS they lose all interest." Somehow this seems backwards—we have a group of students who wish to become FIA's in order to qualify as actuaries in their home country; so the CAS is saying that we will give an FCAS to an FIA simply so that individuals who really want to become FIA's can do so by writing CAS exams. Sorry, but I fail to see any logic in that.
I also hear statements to the effect that an FCAS cannot obtain a "Signing Actuaries" certificate in Dublin. This is not strictly true nor is the issue as simple as it sounds. (There are very few individuals of any sort who are approved in Ireland—for example a grand total of 12 consultants are authorized to sign opinions there.) However, an FCAS who is also an FCIA can qualify in Dublin because of the mutual recognition agreement between the Canadian Institute and the Institute. I am aware of at least one FCAS who has done so. This is further support for pursuing mutual recognition at the Academy level.
Nolan: [Saying that some CAS members have] "strong reservations" about mutual recognition...is using a term that may not be strong enough! At best, a limited form of mutual recognition such as is proposed creates the problem of a "slippery slope." Right now we are only considering MR with three other actuarial organizations under tightly restricted conditions. However, as the years go by, more and more other exceptions may be made until we have opened ourselves up to too many other cases. Right now, consider the case of Canada. Can a United States FCAS easily obtain practice rights in Canada? I don't think so. That is to the credit of the CIA. Furthermore, most of the jurisdictions where we are considering mutual recognition also have residency requirements. That makes the advantage of mutual recognition commercially moot.
Let's consider the commercial aspect. The FCAS designation is clearly the "gold standard" for property/casualty actuarial training worldwide. That is clear in the Bermuda market, which is the most global venue. Also, when Equitas was being formed in 1993, the preferred credential was an FCAS, and an FCAS was awarded the job of CEO. This was one of the most significant property/casualty [job assignments] in Lloyd's history.
Scott: Nolan, although the Equitas situation occurred ten years ago, I can confirm that the sentiment remains that the FCAS is the "gold standard" for non-life insurance positions. I recently spoke to the CEO of one of the new Bermuda-based insurers. Despite the fact that he himself is British, he is adamant that his chief actuary will be an FCAS, not an FIA. The reasons he gave- education, training, and experience.
AR: Walt or Mary Frances, can you respond to some of these concerns?
Mary Frances: Scott is right. The CAS is unique. It is the only organization, worldwide, that offers an education system that is focused exclusively on the casualty practitioner. A few other societies have a casualty actuarial specialization, but none offer the depth included in the CAS syllabus. In North America, we have a system of organizations that allows for separate credentialing and qualifying bodies. That, too, is unique. Everywhere else, the credentialing and qualification roles are combined in a single society. Mutual recognition is about both education and qualification, because outside the U.S. and Canada those two concepts are not separate. In an ideal world, we would be able to secure recognition of an FCAS's qualification to practice anywhere in the world, without the need for the FCAS to obtain membership in any other organization. Unfortunately, the world is not ideal. Membership in other organizations is a prerequisite to practice rights, and for actuaries who are not Americans or Canadians, it is a prerequisite to full practice in their own homes. In order to secure full practice rights for our members—including the future members we would like to have who will not be Americans or Canadians—we need to enable our members to join other actuarial organizations. It would be arrogant to assume that we can achieve this goal in one direction only. We cannot effectively ask other organizations to admit our members without offering a reciprocal privilege.
If we truly believe that our system of education is dramatically better and more attractive to employers, we should view mutual recognition as a tremendous opportunity for candidates outside the U.S. and Canada to take our exams. A significant number of candidates in the U.K. take some of our exams, but dual Fellowship is rare. It's too big an undertaking—talk about seemingly endless travel time! By opening up Institute membership to FCAS's, we enable those candidates to complete Fellowship in both societies at once. In exchange, we invite experienced, practicing casualty actuaries who have completed a Fellowship that includes significant casualty content to join with us in making the CAS truly the worldwide resource for casualty actuarial education and expertise.
I agree that, for expatriate FCAS's, there are plenty of jobs all around the world. It's embarrassing to me, and I think it is an embarrassment to the CAS, that these highly qualified, sought-after practitioners sometimes can't sign statements of opinion in their adopted countries, but have to rely on a presumably less educated, locally qualified actuary to do the actual signing. Wouldn't we want to give that locally qualified, signing practitioner an opportunity to take our exams and be just as qualified as the ex-pat the company hired?
It's a tremendous compliment to the CAS and our qualification that employers outside the U.S. and Canada recognize the quality of our training. Where an employer is specifically looking for an FCAS to fill a position, they are going to be aware of what that credential means. If we adopt mutual recognition, it won't take long for recruiters and employers to learn to ask if the actuary is an FCAS by examination or by mutual recognition. For one thing, they will be instructed to ask by the first FCAS by examination they interview! It will also be pretty apparent from where the candidate has worked. In addition, what employer hires on the basis of credentials alone? Actuaries are hired based on what they have done and what they can do. Mutual recognition is not going to result in confusion.
AR: Additional comments, anyone?
Scott: Until about three years ago the Institute's general insurance track had two property/casualty exams and prior to some 15 years ago it had only one. Prior to 1977 the Institute had no property/casualty exams whatsoever. This means that, with few exceptions, currently qualified FIA's who followed the Institute's general insurance track have taken at most two non-life exams and, in many cases, will have taken one or none. The FIA's current syllabus looks much more like the CAS syllabus but, as I said before, the Education Policy Committee concluded even this is not comparable to the CAS exams. Given that the syllabus was introduced so recently, very few current FIA's will have qualified under the new system. In other words, the majority of FIA's who followed the Institute's general insurance track and hence would appear to qualify currently under a mutual recognition agreement will have written at most two non-life exams. Why would the CAS consider giving such an individual the highest CAS designation available, a designation that, until now, has been reserved for people with the highest level of non-life actuarial education? And I do stress the word education; not experience, not knowledge, but education.
Mary Frances: The CAS would consider offering Fellowship to only those FIA's who (1) had completed the general insurance exams, (2) had significant property/casualty practice experience beyond Fellowship, and (3) applied for membership. We have not negotiated the agreement with the Institute as yet, but I would personally push for only recognition of FIA's who had completed the current exams. FIA's who practice full time in property/casualty insurance but who had not done the general insurance specialization, and actuaries who did general insurance but don't practice in that area, would not be eligible. I agree that the Institute exams are not the same as the CAS exams. Institute candidates are required to pass about the same amount of material as CAS candidates, but the Institute requires intermediate-level expertise in life insurance, pensions, and investments, which leaves less room for the non-life insurance specialization. I'd like to see more of their candidates take our exams instead.
Scott: With respect to the mutual recognition agreement between the CIA and the Institute, it is definitely true that the CIA has seen no great influx of FIA's looking to become FCIA's. I believe this is true for two reasons. First, any simplistic comparison of the Canadian and U.S. markets is flawed from the outset. Second, and perhaps more important, the mutual recognition agreement between the Institute and the CIA actually tightened the rules and made it more difficult for an FIA to qualify in Canada than had historically been the case; thus, I wouldn't expect to see an increase in people qualifying.
Why would students consider Institute exams over CAS exams? First, the Institute does give exemptions for certain of their exams for university course work, albeit at a very select group of schools. Secondly, the average travel time to FIA is currently significantly less than the average travel time to FCAS. If I were a student, I'd find the idea of taking Institute exams as opposed to CAS exams appealing to say the least. As an employer, I have to say that the ability to have a fully credentialed employee in a significantly shorter period of time is not without merit.
Mary Frances: This argument should hold today. The CAS/SOA and the Institute have waiver rules that allow candidates to exchange credits for our first four exams with eight of the Institute's first nine pieces. The content is very similar, the Institute's syllabus materials are arguably better suited to self-study than ours, candidates can do the Institute exams in little pieces, and if they happen to take courses at the U.K. universities for which the Institute gives credit, they could get college credit waivers. I am not aware of a single U.S. or Canadian candidate who is taking the U.K. exams in place of the first four CAS/SOA exams.
If we enter into a mutual recognition agreement with the Institute, Institute candidates who want to be fully qualified in the U.S. or Canada will still need to take CAS 7-Canada or 7-U.S. in addition to (1) a written communications exam, (2) an investments exam, (3) a life insurance exam, (4) a pensions exam, and (5) two property/casualty exams (9 hours total) beyond the equivalent of CAS Exams 1 through 4. The passing percentages on the life and pensions exams approach 50 percent, but they are taken by all the life and pensions candidates as well as the property/casualty candidates. The passing percentages on the property/casualty insurance exams are even lower than the CAS percentages. If I were a North American employer, I would want to pay for five CAS exams, not six Institute exams plus one CAS exam, and I certainly would not want to have to pay perpetual dues to both the Institute and the CAS.
Nolan: I would anticipate a larger number of FIA's could be expected to apply for mutual recognition with the CAS than the CIA. The reasons are the distinctiveness of the CAS designation, its property/casualty specialization, and its global acceptance as opposed to the CIA, which only confers Canadian practice rights (or the SOA for that matter where mutual recognition could be interpreted as one life society exchanging memberships with another life society).
AR: Is there a role for the American Academy of Actuaries with respect to establishing cross-border practice rights in the international arena? What actions should the Academy consider taking? Who wants to start?
Mary Frances: The AAA is very active in cross-border practice discussions, and has led discussions on, for instance, cross-border discipline agreements at the International Actuarial Association. Cross-border acknowledgement of qualifications, however, is a sticky wicket (you can tell I've been watching the cricket world cup!) for the AAA. The AAA has a single category of membership: "member." Members of the AAA include Fellows of the CAS, the SOA, the Faculty and Institute, the Australian Institute, Associates of the CAS and SOA, and enrolled actuaries. In short, just about any actuary who has a qualification and significant U.S. practice can join the Academy. This is really good for the Academy's purposes, which are to speak for the whole profession in the U.S. and to set qualification standards and standards of practice. Broad membership also places all practicing actuaries under the umbrella of the ABCD's discipline process. When we look beyond the borders of the U.S., however, this all-inclusive approach to membership causes immediate problems. Most actuarial organizations around the world have a class of membership, Fellow, that is considered "fully qualified" to practice. In many places, the U.K. for example, there is an Associate membership class, but that class is not considered qualified to practice. So a "Fellow" of a foreign society doesn't match up with a "member" of the Academy. Foreign actuarial societies would be delighted to recognize the qualifications of Fellows of the CAS and SOA, but they are reluctant to even discuss recognizing the (limited) qualifications of other Academy members. This makes mutual recognition through the Academy a non-starter.
There is the additional issue that a growing number of CAS members practice outside the U.S. and Canada. Even if the Academy were able to work through the cross-border qualification issue for its members, CAS members outside North America would still be out in the cold when it came to recognition of their credentials since they can be members of neither the AAA nor the CIA.
Scott: This is the place where mutual recognition and cross border practice rights should be established, not at the level of educational designations. The Canadian Institute reached agreement with the Institute in 1999. I find it surprising that the Institute agreed to this but is apparently resisting entering into any similar agreement with the American Academy.
I'd also be remiss if I didn't point out that neither the AAA nor the CIA have any sort of residency requirement. Both have experience requirements in addition to basic education requirements (in fairness it is unlikely that anyone could actually meet the Canadian requirements without residing in Canada) but there is nothing requiring residency in the relevant country. Qualified CAS members from outside the U.S. routinely join the American Academy.
Mary Frances: Residency is not a requirement for AAA membership, but U.S. practice is. Actuaries from outside the U.S. are required to demonstrate their need for membership in the Academy. So the Academy cannot be the vehicle for all CAS members to achieve global practice rights.
Walter: To my knowledge, in the United States there are no restrictions on who can provide actuarial services except in regard to regulatory requirements for actuarial opinions on loss reserves. If an actuary is going to sign loss reserve opinions, then he or she must meet the Academy's qualification standards.
A non-CAS actuary who is a member of another actuarial society will need to meet the professional standards of that society, and these standards very likely include meeting the qualification standards of any country in which the member practices. So in this case, I guess, the non-CAS member would need to comply with the Academy's qualification standards.
AR: Which aspects of MR, if any, must be approved by a majority of CAS members before implementation? Why?
Mary Frances: The CAS Board has chosen to take a conservative stance in interpreting our Constitution, and has concluded that we should have a constitutional amendment before we enter into mutual recognition agreements with other Societies. Note that the SOA has entered into mutual recognition agreements without amending its constitution.
Scott: There are two components to this question. The first is the legal one, that is, to what extent does the board have the power to act unilaterally without approaching the membership. It is my understanding that the board has sought a legal opinion on the matter and decided to go to the membership. (Why would it feel the need to seek an opinion unless it was considering acting without the input of the membership?) The second is much more an ethical matter. Simply put, when does the board have a moral obligation to approach the stakeholders and ask them what they think as opposed to simply telling those individuals what is good for them? This second question is actually not simple since the stakeholders include Fellows, Associates, and our students. Since mutual recognition will create a second, very different, route to an FCAS, I think we should be asking our Associates and students what they think and, more importantly, we should be listening to what they have to say.
Walter: This is not an issue that I am familiar with. Article III, Section 2, paragraph d) says that the board of directors can waive examinations required for membership. Therefore, I don't think that the Constitution needs to be amended to permit MR, and consequently I don't think that a vote of the CAS members is necessary. Regardless of whether a constitutional amendment is actually required, I think it is a good idea for the board to put this important issue to a vote.
Scott: Walt, I read the paragraph in question but have been told that the board took legal advice on the question and we have been assured that the board will seek a vote of the members. Legal issues aside, I personally feel that this question is so important to the future of the CAS that the board is morally obligated to go to the stakeholders in any case.
AR: Scott, Nolan, what would you like to add before we end this discussion?
Scott: Simply that I regard this effort as being a major mistake. However, unlike past mistakes, such as partitioning, this one will be much more difficult, if not impossible, to reverse.
AR: Walt, Mary Frances, any parting words?
Mary Frances: The CAS has much to gain and little to lose through mutual recognition. It allows us to position ourselves at the forefront of the global property/casualty actuarial community in the 21st century. I believe that the potential gains far outweigh the possible risks, and I plan to vote "yes." I would like to encourage other CAS Fellows to do the same.
AR: Thank you all, very much, for a thought provoking discussion!