Random Sampler:by John P. Doucette
Mutual RecognitionA Member Responds
In response to Mary Frances Miller's and Steve Lehmann's columns in the August 1999 Ac-tuarial Review regarding Mutual Recognition, I think that some level of Mutual Recognition is a good idea and necessary for the future success of the Casualty Actuarial Society. The level of Mutual Recognition that exists today is a good example of how Mutual Recognition can and should work. My understanding is that under the current exam structure, Fellows of the Institute of Actuaries can receive credit for the first five CAS exams; Fellows of the Casualty Actuarial Society can receive about the same credit for FIA exams.
The questions are: What level of Mutual Recognition is appropriate and how far should it go? One proposal for Mutual Recognition is to exchange Fellowships with other actuarial societies, or something substantially close to this.
I am unequivocally against the CAS's offering full Fellowship (or something substantially close to full Fellowship) in the CAS for Fellows of other actuarial societies who have not passed the CAS exams. It is simply a bad idea and should not be implemented.
I have heard the comment that if the CAS did offer FCAS to Fellows of other actuarial organizations but only to those who practiced in the United States for one year or more (and, perhaps, passed one exam on country specific regulations), then this change in the policy would be almost academic as there are very few people to whom this would apply. I disagree with this argument on two counts.
First, if a decision is fundamentally inequitable, then it is the wrong decision irrespective of whether it affects one person or one thousand people. A non-CAS Fellow working in Bermuda or London can work on U.S. property-casualty exposures. Why should a non-CAS Fellow working in New York or Hartford or Chicago on U.S. property-casualty exposures have more of a right to the FCAS designation without passing the CAS exams?
Second, the number of non-CAS actuaries seeking a CAS Fellowship through Mutual Recognition could be very large. Having been an employee of two international firms, a large reinsurance firm and a well-known consulting firm, I have seen first hand many non-CAS actuaries who have spent a rotation period in the U.S., each of whom would pass the residency requirement being contemplated under the current proposal. These include British, Irish, Scottish, and Australian actuaries. The end result is the potential number of non-CAS actuaries who come to the U.S. may be much larger than realized. Furthermore, if such a policy were enacted, we should expect a large increase in non-CAS actuaries from the U.K. and Australia who come to work in the U.S. just to take advantage of this "back-door" path to FCAS. If Mutual Recognition were broadened to include actuaries from other countries, then the numbers could be very large, certainly much larger than would make such a policy purely academic.
As members of a profession that analyzes aggregate data to make estimates of future outcomes, we are all aware that anecdotal evidence, while a powerful tool to demonstrate a point, does not necessarily lead to valid general conclusions. I have heard that at least one CAS Fellow has had a difficult time finding work in Australia, because that person does not have Australian actuarial credentials. That particular example may demonstrate a limitation of employment, as Ms. Miller alluded to in her column, for CAS actuaries outside the U.S. However, I can offer several counter examples. I know of several actuaries working in London, Zurich, and Bermuda whose FCAS designation has been enough to get them several job offers each.
Never has the FCAS designation been in more demand in the London market than now. There is a market-wide shortage of experienced general insurance actuaries (both CAS and others) in Zurich. The demand in Bermuda for CAS-trained casualty actuaries has grown at an astounding rate. Several colleagues in these places have told me that FCAS is a highly sought credential for employment and in some cases is the preferred actuarial designation. In short, there are many worldwide opportunities for CAS Fellows.
The issue of equity also compels me to argue against the proposal of awarding the FCAS designation without passing CAS examinations (or something substantially close). It is simply unfair to the current and past students of the CAS exams and discriminates against people who would take the CAS exams to get their FCAS. Here are my reasons:
1. Travel timeI believe that it takes CAS members six to seven years on average to attain ACAS and eight years or more to attain FCAS. I believe it takes on average approximately five years to get the FIA, about one-third less time. An FCAS puts thousands of hours of study time into attaining this designation. Allowing a one-third reduction in travel time for a select group of candidates is unfair to the other candidates.
2. Course credit substitutes for actuarial exams in other actuarial societiesIn the current U.K. exam system, one can take certain university courses from certain universities and receive credit for many of the exams without sitting and passing them. (My understanding is that Australia has a similar system.) Some of the actuaries produced under this system cycle through the U.S. in company training programs, staying long enough to fulfill the proposed Mutual Recognition residency and experience requirements.
3. Existing reciprocal recognition arrangementsIn some European countries, one qualifies as an actuary upon receiving a degree as an actuarial major from an undergraduate university. Because of the European Union, the U.K. actuarial society must recognize such an "actuary" as an FIA, despite essentially no exams and no experience. This issue may eventually confront the CAS as it heads down the path of Mutual Recognition of Fellowships.
4. FSA to FIA to FCAS path to CAS FellowshipAgain, the equity issue: why should a foreign actuary Fellow, but not an FSA, be granted the FCAS designation? Is it because an FSA has passed no casualty exams? A British actuary has passed one casualty exam, so what about an FSA who takes the British general insurance (P&C) exam? Shouldn't that person be able to receive Fellowship through Mutual Recognition? And if every FSA is given this opportunity, hundreds (thousands?) of people could attain their FCAS through Mutual Recognition!
Furthermore, full voting rights in the CAS go hand in hand with full Fellowship in the CAS, and we risk diluting the voting rights of people who attained FCAS through the CAS exam process. This is not a minor point. Future CAS votes could reflect much different CAS Fellowship demographics if the proposal is implemented. The non-CAS Fellows who gain Fellowship in the CAS through Mutual Recognition could vote in the future to broader the Mutual Recognition rules even more.
What are we giving up by not enacting the proposed Mutual Recognition policy? Perhaps, by not implementing this policy, we might be giving up some reserving/actuarial opinion jobs, but Mutual Recognition of practice rights is very different than mutual exchange of Fellowships. In fact, I think the exchange of practice rights is feasible and should be examined, but not the exchange of Fellowships.
Our clients include senior management, consulting clients, shareholders of insurance companies, and policyholders of insurance companies. These clients look to us as FCAS actuaries to be able to understand, analyze and communicate complex issues in a reliable manner. The CAS has earned a very high professional reputation from the collective effort of its members over many years. Such a valued reputation may be put at risk by lowering the high minimum standard of knowledge, experience, and understanding of property/casualty insurance issues and risks that is required of a Fellow of the Casualty Actuarial Society.
I have presented many reasons here why offering full Fellowship in the CAS (or substantially close to that) for Fellows of other actuarial societies who have not passed CAS exams is a bad policy. It should not be implemented. The negative effects far outweigh whatever positive benefits may be realized. Awarding the FCAS to people who spent less effort to get their actuarial Fellowship than those who passed the CAS exams seems especially unfair to recent CAS Fellows and current CAS students as they will be competing for the same jobs.
As of this writing, over 80% of the respondents to the Mutual Recognition survey on the CAS Web Site do not want to offer either ACAS or FCAS designations to non-CAS Fellows. The consensus seems to be that we position ourselves to maintain our worldwide leadership role in the property-casualty area and continue to guarantee that the FCAS designation denotes a high level of training.
What is a good Mutual Recognition policy? The appropriate level of credit to give for non-CAS exams towards the CAS designations is five out of nine exams (under the 2000 syllabus). In other words, the CAS should give no more than 5/9 credit towards the FCAS designaton and 5/7 credit towards the ACAS designation. I think the CAS Syllabus sates it well: "Individuals who claim competence in the areas covered by the examinations should not have difficulty demonstrating their competence by participating in the examination process."