Discussion of Three-Year Experience Charge (5/3/2018)
In the Qualification Standard for Actuaries Issuing Statements of Actuarial Opinion in the United States (QS), Section 3. Specific Qualification Standards states:
3.2 Experience Requirement – An actuary must obtain at least three years of responsible experience relevant to the subject of the Statement of Actuarial Opinion under review by an actuary who was qualified to issue the Statement of Actuarial Opinion at the time the review took place under standards in effect at that time. Although this experience need not necessarily be recent, it must be relevant to the subject of the Statement of Actuarial Opinion.
CASTF’s charge is:
Work with the American Academy of Actuaries to add clarity to the required three-year experience period in the U.S. Qualification Standards regarding the mentor’s responsibilities and the learning expectations for the actuary.
PROPOSAL #1: Keep Three-Year Experience Standard As-Is
Discussion:
The American Academy of Actuaries (AAA) experience requirement is conceptually clear but it is a concept without objectivity. We do not know any details on how the Appointed Actuary (AA) met the experience requirement, other than the AA’s “word.” If clarity were added to the existing QS experience requirement, it would be to add objectivity in these areas:
- The AA Reviewer’s responsibilities;
- The AA Reviewee’s responsibilities;
- The expectations for the AA’s three-year learning experience; and
- Documentation on how the AA met the QS’s experience requirement.
Recommendations:
- Ask the AAA to:
- Create guidance for the AA Reviewer’s responsibilities during the QS’s three-year experience period.
- Create guidance for the AA Reviewee’s responsibilities during the QS’s three-year experience period.
- Create guidance for the AA Reviewee’s learning objectives during the QS’s three-year experience period.
- Create guidance for detailed documentation in support of the AA’s compliance with the three-year experience requirement.
- Require a narrative be placed in the AA’s attestation covering responsibilities and experiences in support of the QS’s three-year experience requirement.
- Ask the CASTF to:
- Revise the P&C Annual Statement instructions to require that a narrative covering responsibilities and experiences in support of for the QS’s three-year experience requirement be given to a company’s Board of Directors.
PROPOSAL #2: Remove “Reviewer” From Three-Year Experience Standard
Discussion:
The QS requires that the Appointed Actuary (AA) obtain at least three years of responsible experience relevant to the subject of the Statement of Actuarial Opinion under review by an actuary who was qualified to issue the Statement of Actuarial Opinion at the time that the review took place. At a point in time, it may be difficult or impossible to prove the three-year experience requirement was met due to the “under review by an actuary who was qualified” language of the QS requirement. Corroboration by the reviewing AA may not be feasible for a number of reasons, e.g., too many years have passed to remember details or reviewing actuary not reachable.
To meet the three-year experience QS requirement, wouldn’t it be sufficient if the AA provided documentation of the AA’s own three-year experience period? This second proposal is to answer this question in the affirmative. Therefore, if “under review by an actuary who was qualified to issue the Statement of Actuarial Opinion at the time that the review took place” is removed, we are left with:
3.2 Experience Requirement – An actuary must obtain at least three years of responsible experience relevant to the subject of the Statement of Actuarial Opinion. Although this experience need not necessarily be recent, it must be relevant to the subject of the Statement of Actuarial Opinion.
The American Academy of Actuaries (AAA) experience requirement is conceptually clear but it remains a concept without objectivity. We do not know any details on how the AA met the experience requirement, other than the AA’s “word.” This proposed QS three-year requirement is easier to prove/document since it only requires the AA to be responsible in order to meet the QS requirement.
If clarity were added to the revised QS requirement, it would be to add objectivity in these areas:
- The AA’s responsibilities;
- The expectations for the AA’s three-year learning experience; and
- Documentation on how the AA met the QS’s experience requirement.
Recommendations:
In this proposal, the experience requirement is revised to remove the review by an AA.
- Ask the AAA to:
- Remove “under review by an actuary who was qualified to issue the Statement of Actuarial Opinion at the time that the review took place” from the existing QS three-year experience requirement.
- Create guidance for the AA’s responsibilities during the QS’s three-year experience period.
- Create guidance for the AA’s learning objectives during the QS’s three-year experience period.
- Create guidance for detailed documentation in support of the AA’s compliance with the three-year experience requirement.
- Require a narrative be placed in the AA’s attestation covering responsibilities and experiences in support of the QS’s three-year experience requirement.
- Ask the CASTF to:
- Revise the P&C Annual Statement instructions to require that a narrative covering responsibilities and experiences in support of for the QS’s three-year experience requirement be given to a company’s Board of Directors.