Cassandra of the CAS

(Editors' Note: This is a letter that was originally submitted to the CAS Board of Directors. Cassandra was a daughter of Priam endowed with the gift of prophecy, but fated never to be believed. Merriam Webster's Collegiate Dictonary, 10th edition.)

Dear Fellow Directors:

We have been quiet, placidly reacting to the SOA advances, and timidly burying our heads in the sand. Perhaps it is that we have no solution to propose; so we pretend that no solution need be proposed.

Recent years have been good to us. The Statement of Actuarial Opinion establishes the casualty actuary as arbiter of indicated reserves. The Appointed Actuary of the future, as envisioned by the American Academy of Actuaries, will have an even more important role, reporting on the financial strength of the company under a variety of future scenarios. The demand for casualty actuaries is strong.

In 1988, California passed Proposition 103, the "Full Employment for Actuaries Act." Company rate filings now come in cardboard boxes with complete descriptions of internal rates of return, capital allocation, and risk-adjusted cash flow models. Casualty actuaries are needed to file, analyze and judge. Demand grows ever stronger.

How different it is across the fence! Twenty years ago, it was thought that ERISA would establish the primacy of the pension actuary. Diskettes and spreadsheets have proved cheaper, faster and more accurate. Pension actuaries are happy to hold onto the jobs that remain.

Life actuaries speak of expanding into investments, banking and other financial risks. What they mean is that the life insurance industry has matured, mortality tables rarely need revision and computers handle most pricing work. Demand for life actuaries is weak.

Individuals are ever polite, but economics rules institutions. The SOA disclaims any intention of co-opting casualty actuarial science under its wings. But casualty actuarial science is where the future lies, and it is where the jobs lie.

The SOA examination system is being restructured. The SOA Associateship exams cover all the material on the casualty Parts 4A, 4B, 5A, 5B and much more. They have various electives for the Fellowship exams, and they intend to cover all contingencies, not just life contingencies.

How simple it would be to add a ratemaking and reserving casualty exam as another elective! Let the SOA graduate casualty actuaries, just as they graduate life actuaries.

We hear numerous objections from our casualty brethren, some embarrassing and some just silly.

But the casualty education leading to the FCAS is more rigorous than an SOA education in casualty topics would be. This is probably true, and it is surely convincing to CAS members. It sounds like a joke to most life actuaries, who see the CAS Examinations as a poor imitation of the SOA tests.

But only CAS members are qualified to sign the property/casualty Statement of Actuarial Opinion. It would indeed take a few days to have the NAIC and the American Academy of Actuaries grant qualification to casualty actuaries graduated by the SOA.

But the SOA has promised that they will rely on the CAS for the casualty exam. No doubt the SOA will invite the CAS to help them design their casualty exams and to recommend syllabus readings.

The public knows that CAS Fellows are the true casualty actuaries. On the contrary, the public knows of the "Society of Actuaries." The public even knows what the actuary does: The actuary studies mortality rates, sets life insurance premiums, and establishes pension plans. If pressed hard enough, the public would admit that this actuary probably sets auto insurance rates as well. The SOA would nod in assent.

The CAS is a wonderful society. We are small and cohesive; the future beckons brightly; and we may soon be dismembered.

What solutions might be recommended?

We are a reticent society. Whenever a public posture is required, we defer to the American Academy of Actuaries. The CAS stays in the back room. But the public associates the American Academy with life actuaries.

If we wish to remain independent of the SOA, we must establish a more forceful public image for the CAS. (Author's emphasis.)

Is this a recommendation? No, not really. Casualty actuaries are busy fellows. The American Academy of Actuaries handles public relations. Our volunteer committees are a poor comparison to their salaried staff. Few casualty actuaries want to take on the lobbying and marketing activities that the Academy performs.

So it is not a recommendation—surely not a recommendation from me. It is indeed pleasant to have our society as the education foundation of casualty actuarial science, and to have the American Academy handle the "public interface" chores. But it means that one day we will be a vestibule in the House of the SOA.

Sincerely,
Sholom Feldblum, FCAS, CPCU, ASA, MAAA