Expanding Our Horizons to Encompass the Globe
By Stephen P. D'Arcy 

In March 2003, the CAS Board adopted the following statement as our Centennial Goal for 2014:

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

In a prior column I wrote about why actuaries need to sail the seas of enterprise risk management, a topic that represents the integration of hazard risk with strategic, financial, and operational risk. Given recent developments, I expect to write more about enterprise risk management in the future. However, I would like to devote this column to the "globally recognized" aspect of our Centennial Goal.

Although the CAS does have members from around the world, most of our members reside and work in North America, with many employed by insurers that do not operate outside of North America. It is gratifying that the recent CAS membership survey indicated strong support for our current international activities. However, as someone who once worked for a small Midwestern insurer without any business beyond the United States, I can understand those who ask about our international activities, "What's in it for me?"

The answer to that question is multifaceted. Our international activities are expected to improve insurance company performance even for companies whose only business is within North America, to advance actuarial practices, to cope with changes in regulation and accounting standards, to expand employment prospects for casualty actuaries, and to assure the future of our profession. Through this article, I hope to foster your interest in international issues and encourage you to get involved in our efforts to meet this part of our Centennial Goal.

How can international activities affect the performance of a company that operates solely within North America? North America is not an island unto itself now, if it ever really were. We exist in a global economy, and the regulations and operations of insurance companies around the world affect our own business opportunities. This global economy has transformed the world of commerce. Companies now routinely do business internationally, so many commercial policyholders will manufacture and distribute their products around the world. They face global risks, and many need to obtain insurance coverage for their international exposures. Thus, knowledge of international insurance markets is essential for their insurers, wherever they are domiciled.

Even if an insurer's market is only within North America with no international exposure, reinsurance is a global market. Whatever affects the reinsurance market anywhere in the world, regarding claims, regulation or competition, will affect what your company will pay for reinsurance, and thus your company's profitability. Understanding international insurance markets is essential for anyone affected by reinsurance.

International cooperation can enhance actuarial practices. Actuaries around the world are dealing with similar problems as we attempt to quantify uncertainty. By combining our efforts, we are likely to improve the process more quickly. By sharing best practices internationally, we are able to benefit from the advances made elsewhere and export the approaches that we have developed. This process improves actuarial work for all. Risk is the same throughout the world, but its treatment can vary based on local regulations. If appropriate, standard treatments can be developed and applied uniformly, which can benefit everyone.

The insurance world today truly represents a global economy, much more so than even a few decades ago. This trend is apparent from the student population in actuarial science and insurance classes at the University of Illinois. We have always had a significant international presence in these classes, but the mix has changed significantly over time. In the 1980s, students from Britain, Austria, France, Japan, and Korea, countries where the insurance industry was well developed, were the ones who tended to gravitate to these courses. Now, though, students in these classes hail from Pakistan, Malaysia, Saudi Arabia, Bahrain, India, and China, countries where the insurance industry is developing or changing. Whereas two decades ago we could share our insights into the insurance process with students from other countries with well-established insurance institutions, we now have the opportunity to teach the people who will be creating an insurance infrastructure in their countries. If the CAS doesn't assist in this development, then either some other organization will, to the exclusion of the CAS, or residents of those countries will develop their own approaches independently. Since we have already faced and solved many of the issues they will deal with, we should be willing to share our expertise. This will help them avoid having to reinvent the wheel, and encourage common international actuarial approaches.

Failing to help other countries deal with problems we have already faced can adversely affect the actuarial profession in general. The unisex risk classification issue, widely debated and generally settled in the United States several decades ago, recently became an issue in Europe. The publicity raised by this development then rekindled this debate in some regulatory jurisdictions within the United States. By sharing our expertise and experience internationally, we can avoid having to deal with the same issues repeatedly, as each jurisdiction sequentially addresses the same issues.

Regulatory developments in one country can have international effects. The Morris Review of the Actuarial Profession in Britain and the Report of the Royal Commission into HIH Insurance in Australia demonstrate the global reach of insurance regulatory issues. If we don't learn from problems relating to peer review, continuing education requirements, or the independence of our discipline process that have affected the actuarial profession elsewhere, then these issues will become a serious problem for our profession in North America. It is imperative that the CAS keeps track of such important developments wherever they occur, to inform members, to influence the effects, and to prevent the type of problems that led to these reviews.

International insurance accounting standards affect the operations of insurers even if they only operate in Canada or the United States. A push toward comparable global regulation of financial institutions could lead to internationally driven changes to standards within North America. That is one reason why a few CAS members devote so much effort to staying involved in the international regulatory process. If the standards do differ among countries, insurers operating in certain locales could have an economic advantage that could allow them to be more competitive than other insurers. As regulatory standards around the world converge, then understanding and influencing insurance regulation globally is an important role for the CAS.

Globalization has also transformed the insurance industry. Mergers and acquisitions on an international basis are now common. The Midwest insurer could easily find its new owners from another country, especially if accounting rules vary by country in such a way as to generate an advantage for one country's insurers. ("Wait," you say. "I work for a mutual insurer. They aren't subject to takeovers." I would respond, "Have you heard about demutualization?")

Employees are also more mobile, transferring across borders and moving to where the best opportunities exist. If casualty actuaries are following similar exam tracks around the world, this process will be facilitated. When looking to hire your next assistant, if all actuaries have a common approach to actuarial methods, your choice will be much broader as you can search globally for the right person, and your next employee is more likely to be successful. If you are looking to relocate yourself, being qualified to work for companies around the world will improve your employment prospects. You might be working for a small Midwest insurer now, but your next job might be in Zurich, or Singapore, or elsewhere. The CAS, through its globalization efforts, can make your professional transition to international positions much easier.

The demand for experts in hazard risk and for integrating hazard risk with other forms of risk far exceeds the number of CAS members. If we are the best qualified profession for this task, then increasing our numbers by coordinating with casualty actuaries around the world will help us meet this demand, provide more opportunities for all, and enhance the reputation of our profession.

Although the CAS is currently the only actuarial organization in the world to focus on casualty actuarial science, and we have more members working on casualty (general) insurance than any other actuarial organization, the amazing economic growth in China, India, and other developing countries could quickly change that relationship. If the CAS does not become globally recognized as the pre-eminent resource in our field, some other organization will. How favorable would your future career outlook be then?

In order to meet our Centennial Goal and become globally recognized, here are some of the actions we are we taking now. The CAS is devoting significant resources, in both time and money, to international issues. We have a vice president-international, Amy Bouska, whose function is to manage CAS international activities. We have appointed delegates to the International Actuarial Association (IAA) and cover their travel expenses to IAA meetings. We try to make sure that the CAS is well represented at international actuarial meetings, including GIRO (General Insurance Research Organization), ASTIN (Actuarial Studies in Non-Life Insurance), AFIR (Actuarial Approach for Financial Risks), the Institute of Actuaries, the Faculty of Actuaries, the Institute of Actuaries of Australia, the Global Conference of Actuaries, and many other international actuarial meetings. Our board spends considerable time on international issues, primarily considering and responding to proposals emanating from the IAA. We offer CAS exams in 34 countries outside of North America, and sponsor joint exams with the SOA that are offered in over 100 countries. We have established regional committees for Asia, Europe, and Latin America. We have worked with actuarial organizations in many other countries on developing actuarial exams and have sent CAS members to other countries to give seminars on casualty actuarial topics. We now have a welcome message on the CAS Web Site in eight languages.

With all these activities, and more to come, we need the help of as many members as possible. If you are interested in getting involved in our international activities in any way, please let us know by contacting Cynthia Ziegler, our Executive Director, Amy Bouska, our VP-International, or me. Who knows what additional opportunities will arise for you when you expand your horizons? At the very least, you will meet some fascinating people and have some unforgettable experiences. Just ask some of the many CAS members already working on international programs.

So, the simple response to the question, "What's in it for me?" is, "Your actuarial future." That is why the Centennial Goal is for the CAS to be globally recognized.