VEE Redux
Dear Editor:
I would like the opportunity to comment on two letters to the editor that appeared in the February Actuarial Review in response to my November opinion column regarding VEE.

Oakley E. Van Slyke and the VEE Administration Committee both state that the VEE topics (or at least "advanced aspects" thereof) are validated by later examinations. If this subsequent testing is meaningful, I suggest the VEE requirements be eliminated. We should not specify how candidates are to learn the material we test them on; it is sufficient that they prove they have learned it.

The VEE Administration Committee also appears to feel that I was attacking them for doing a shoddy job. I was actually pointing out that their job couldn't be done well, and arguing that it therefore should not be done at all. VEE does not validate anything, for the reasons I explained in November. The actuarial organizations force candidates to pay fees, and often tuition, and at the end of the process there is no reasonable assurance that the intended material has been learned. I believe that the exam system, whatever its flaws, was better than this.
Randall D. Holmberg, FCAS

Actuarial Credibility-Further Discussion
Dear Editor:
Thanks for your great note on actuarial credibility. You are correct—the public wants the exact answer and actuaries have not done a good job in communicating that we can't provide an exact answer.

There seems to be this focus on actuarial credibility at a time when insolvencies among companies are at a historically low level. Unfortunately, the actuarial analysis is usually at the "tail end" of a company's problems—no one wants to go back and question the underwriting, marketing, investments, or policy language. It becomes simply a matter of the reserves—as if reserves were the cause of the insolvency rather than just an indicator of it.

I think we need to turn back the question to the regulators/public and ask them: What is the ideal number of insolvencies/failures that you want to see in the insurance marketplace? If the number is zero, then the liabilities for any insurance will need to be set at a super-conservative level driving up the capital required and ultimately the price. Since capital is higher to form an insurance enterprise, there will be less competition and innovative products will not be brought to the marketplace.

Or is it better to accept the mechanisms that we currently have for dealing with insolvencies such as guarantee funds, accept the risk and move on?
Lee M. Bowron, ACAS, MAAA

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