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Presented to: Actuaries Club of Philadelphia February 16, 2010

Risk is Opportunity: The Actuarial Profession in 2010. Presented to: Actuaries Club of Philadelphia February 16, 2010 S. Michael McLaughlin, FSA, CERA, SOA President. Risk is Opportunity: Agenda. ERM and the CERA goes Global Broader Roles for Actuaries Employers Council

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Presented to: Actuaries Club of Philadelphia February 16, 2010

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  1. Risk is Opportunity:The Actuarial Profession in 2010 Presented to: Actuaries Club of Philadelphia February 16, 2010 S. Michael McLaughlin, FSA, CERA, SOA President

  2. Risk is Opportunity: Agenda ERM and the CERA goes Global Broader Roles for Actuaries Employers Council SOA Strategic Initiatives for 2010

  3. Enterprise Risk Management

  4. Enterprise Risk Management Enterprise Risk Management is the discipline by which an organization in any industry assesses, controls, exploits, finances and monitors risks from all sources for the purpose of increasing the organization’s short- and long-term value to its stakeholders. - Courtesy, Casualty Actuarial Society 2003

  5. ERM Leading Principles: • Culture • Roles and Responsibilities • Integration • Communication

  6. In addition to considering the requirements of S&P and other external stakeholders, the maturity model can be used to understand how a company’s ERM practices compare to other industry participants. The model shown here is a generalized version of a model that can help companies assess the robustness of their current ERM program. The model considers not only rating agency and regulatory requirements, but also the business value of ERM activities. The ERM Maturity Model • The maturity model shows five stages of ERM capability • In the Ad Hoc stage, ERM procedures are reactive rather than proactive • At the most mature end of the spectrum, the Strategic stage is characterized not only by a robust systematic process for ERM, but by continuous improvement to that process • Most companies are currently situated between the Fragmented and Integrated stages of the maturity model Risk Management Process Capability Maturity Model† Risk Management is built into decision making. The organization selectively seizes opportunity because of its special ability to exploit risks Risks are treated as a portfolio at the enterprise level and are correlated and aggregated across risk types and business units Risk Management is enterprise-wide and encompasses all risk types Risk Management functions independently within business units Overarching risk management philosophy or objectives are not defined Ad Hoc Fragmented Comprehensive Integrated Strategic Quality Risk † Adapted from the Capability Maturity Model framework developed by Carnegie Mellon University

  7. CERA Credential goes Global!

  8. Chartered Enterprise Risk Analyst (CERA) Credential for ERM

  9. Global CERA Treaty

  10. Broader Roles for Actuaries

  11. An Actuarial Contract High initial acquisition cost, including sales commission, bonus; intangible asset recovered out of future profits Recurring fees over several years Contract subject to mortality, lapse, replacement, time value of money Fee on early termination Various plans are available (size, term); extra features available at added cost Price guarantees typical

  12. A Mortality Study

  13. A Mortality Study Natural gas utility Pipes, valves installed, maintained, removed Needed to estimate depreciation costs based on average lifetime Accurate records available back to 1902 Performed a mortality study, using actuarial methods Alternative approach: rust pit depth method

  14. Actuarial Skills: Present and Future

  15. Actuarial Skills: Present Predictive Modeling for Underwriting, Marketing Customer Value Expense Analysis (functional, ABC) Sports statistics Airline pricing Operations research

  16. Actuarial Skills: Future PMO (Project Management Office) Team building Meeting facilitation Storyboarding Presentation and media skills Speaking out, being visible

  17. How do we know? How will we get there? Employers Council

  18. SOA Employers Council – December 2009 Meeting • Employers: • Want the profession to be more visible outside of traditional areas • Place a high value on experience studies • See opportunity in broader roles for actuaries • Show great support for the profession; many want to be more involved

  19. SOA Employers Council • Provides insight on: • Business trends, issues and challenges • Hiring and staff development needs, preferences and practices • Business needs for research and other forms of intellectual capital development in risk-related areas • Market relevance of SOA products and services

  20. SOA Strategic Initiatives for 2010

  21. SOA Strategic Initiatives for 2010 • Global CERA Credential • International Membership Strategy • Intellectual Capital Framework • Role of Academia • Professional Development Redesign

  22. SOA Strategic Initiatives for 2010 • Communication 2.0 • Marketing and Market Development Plan • Untapped Opportunities for Actuaries in the Health Industry • Interorganizational Synergies • Leadership Development Program

  23. Questions?

  24. Thank You

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