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A Global Profession

by Michael A. Walters

At a recent international actuarial conference in Eastern Europe, the local countries were reviewing how to offer exams to their students. The existing exam-giving bodies offered to help, but their systems were not ideally suited to the new countries (too nation-specific). This prompted me to try to construct the ideal structure of the actuarial profession for that purpose, but also to further advance the profession's needs globally.

Prominent in the design of the structure is the notion that actuarial principles and techniques are global and fairly sophisticated, which implies specialization. However, exposure to techniques in different areas of practice can be enlightening to the actuarial student. In addition, common skills invite uniform testing of all actuarial students.

Allowing for reasonable travel time is another goal, which, together with globalizing the syllabus, might involve excising some of the nation-specific material today. Finally, the existence of several exam-giving bodies (but not dozens for various countries) helps to spur competition and innovation on ways of testing actuarial students.

Overall Structure

The International Actuarial Association (not a membership organization) would provide oversight of the structure, with recommendations on minimum standards to qualify as a profession.

In each country, one country-specific organization (CSO) would deal with discipline, regulation/legislation, and the public. In the U.S. this would be the American Academy of Actuaries. In Canada this would be the Canadian Institute of Actuaries.

Five different areas of actuarial practice—life insurance, pensions, health, casualty, and investments—would each have an international exam-giving body (EGB) to provide basic and advanced education. Their exams would be in the English language, as would many of the readings, but accommodations could be made for translation to any language.

There would be joint sponsorship of basic actuarial mathematics exams common for all major areas (or possibly a separate EGB for them). These exams would cover calculus, probability and statistics, basic life and casualty contingencies, loss distributions, and credibility theory. University credit could be substituted for some but not all of these exams. Other topics such as economics, finance, and basic accounting might be considered prerequisites for entering the actuarial profession, requiring university course credit for those subjects. There could also be alternatives to some exams, such as seminars or a thesis.

Where local regulations and unique conditions require it, such as signing a public actuarial opinion, each CSO could have a country-specific exam, perhaps one for each major area, relevant to those local issues.

Transition to New Structure

Many of the CSOs are already in place and some of them also give exams (U.K., Australia, Germany). The international EGBs would assume responsibility for administering the non-CSO exams (although there could be some commonality of staff).

The international EGBs would collaborate and remove some of the nation-specific material in designing a more focused global exam on their specialized topics.

The international EGBs might also help in fashioning some CSO exams. In that process it is recognized that detailed information, while useful in immediate practice, can become outdated in the practice over time. This suggests more emphasis on continuing education to ensure current qualification to sign an actuarial opinion, for example.

Some smaller countries may have just one CSO exam covering all areas of actuarial work for that country, to allow a single actuary to sign various opinions. However, a universal practice standard would require an actuary to meet the "mirror test," that is, does the actuary have sufficient experience and expertise to sign off on this project? If not, then the actuary may need to get a second signer who is more versed in the technology of this project, even as the actuary may be more familiar with the local regulations and conditions.

The international casualty EGB would start with the CAS syllabus, but would need to incorporate important parts of the U.K. and Australian syllabus. Casualty associateship would require exams on coverages, basic ratemaking, and reserving. (A CSO exam would cover accounting, regulations, legal systems, and any unique coverages.) Casualty fellowship exams would include advanced ratemaking and reserving and other techniques such as DFA and valuations.

The investment EGB might draw heavily on the U.K. experience (where 25 percent of its actuaries practice in investments, not insurance), while the life and pension EGBs would meld SOA, U.K., and Australian material. The health EGB might be more U.S.-based, as other countries tend to have less of a private health insurance system.

Advantages of the New System

Separate EGBs would have the focus on their primary mission to get the best syllabus for their constituents in those major areas. (There probably have been past compromises by trying to cover too broad a scope.)

Separate EGBs would also provide competitive energy to experiment and innovate, which would benefit all organizations.

The global focus would improve the education with innovations and participation from around the world.

Emerging economies with a much newer actuarial profession would reap the wisdom of this combination via global exams administered by others, which they could marry with their own customized country-specific exam.

With a global syllabus, university-based actuarial educators in some countries could better plan the migration to exam-based actuarial education, even beyond common early mathematical exams.

The controversy over mutual recognition would almost become moot, as the EGBs would be truly international. Thus, a pension fellow would be recognized as highly trained in pension matters worldwide. However, if a particular CSO requires country-specific knowledge for an actuary to sign an opinion, the actuary may need to take that exam or co-sign with one who has.