The IAA and its contribution to the actuarial profession: The importance of Professionalism

1. The IAA and its contribution to the actuarial profession:The importance of Professionalism Bogota, Colombia 21 November 2011 Chris Daykin, Chief Executive, IAA Fund

2. International Actuarial Association A short history • established 1895 at 1st International Congress • association of individual members • organising Congresses • and, from 1957, starting up Sections • International Forum of Actuarial Associations formed 1995 • IAA established with new constitution in 1998 • to take over role of IFAA • worldwide association of professional associations

3. International Actuarial Association Vision of IAA Toseek worldwide recognition of the actuarial profession as a major player in the decision-making process within the financial services industry, in the area of social protection and in the management of risk, for the well-being of society as a whole

4. International Actuarial Association Principle of subsidiarity • The IAA restricts its activities to strategies and programmes which require international co-ordination or direction • It does not become involved with actions at national level, except at express invitation of actuarial association or group • It avoids duplication or overlap with activities of Member Associations or regional groups of actuarial associations

5. International Actuarial Association Requirements for associations to become Full Member • code of conduct meeting minimum requirements • disciplinary scheme meeting certain requirements • due process before adopting standards of practice • education of newly qualified actuaries meets requirements of core syllabus and guidelines • pay annual dues to IAA

6. International Actuarial Association Membership • Full Member Associations: 63 • Associate Member Associations: 26 • assisting development of profession in 30 additional countries • fully qualified actuaries: 60,000+ in more than 100 countries

7. International Actuarial Association Institutional Members: • International Association of Insurance Supervisors (IAIS) • International Accounting Standards Board (IASB) • International Social Security Association (ISSA) • International Organization of Pension Supervisors (IOPS) • Organization for Economic Cooperation & Development (OECD) Observer Member: • Asian Development Bank (ADB)

8. International Actuarial Association Strategic Plan - Five strategic objectives: • Build relationships with key supranational audiences • Expansion of scientific knowledge to wider fields to enhance the scope, quality, and availability of actuarial services

9. International Actuarial Association Strategic objectives • Common standards of actuarial education and principles of professional conduct as well as guidance for actuarial practice; promote development and issuance of actuarial standards in jurisdictions of Full Member associations, and the global convergence of actuarial standards

10. International Actuarial Association Strategic objectives • Support the development, organization, and promotion of the actuarial profession around the world • Provide a forum for discussion for actuaries and actuarial associations

11. Committees and Working Groups • Executive • Nominations • Audit • Accreditation • Advice & Assistance • ERM and Financial Risk • Insurance Accounting Standards • Insurance Regulation • Education • Professionalism • Pensions and Employee Benefits • Social Security • Supranational Relations • Mortality Working Group • Population Issues Group • Actuarial Standards

12. IAA Sections ASTIN – general insurance, risk and research AFIR – investments and financial risk IACA – consulting IAAHS – health and care PBSS – pensions, benefits and social security IAALIFE – life insurance AWB – Actuaries without Borders

13. IAA Activities • 30th International Congress of Actuaries, Washington DC, 30 March – 4 April 2014 • IAA Council and Committee meetings: • Los Angeles, 23-26 May 2012 • Bahamas, 15-18 November 2012 • Netherlands, 23-26 May 2013 - • Joint Colloquium of PBSS/IAAHS/IACA • Hong Kong, 6-9 May 2012 • Joint Colloquium of ASTIN/AFIR/IAALS • Mexico City, 1-4 October 2012

14. IAA Activities – IAA Fund • Regional Meeting for Southeast Europe • Zagreb, Croatia, 3-4 October 2011 • Asian Regional meeting • Kuala Lumpur, Malaysia, 10 October 2011 • 2nd African Actuarial Congress • Nairobi, Kenya, 2–4 November 2011 • Introduction to the actuarial profession seminar • Ulan Bator, Mongolia, 14-15 November 2011 • Latin American meeting • Bogota, Colombia, 21-23 November 2011 • Introduction to the actuarial profession seminar • Luanda, Angola, 24-25 November 2011

15. The importance of professionalism

16. What is a profession? Six key characteristics of a profession are: • members join together to apply a specialised skill • the skill has been developed through appropriate education • members have a special relationship with those served • recognised by the public as an authority in field of expertise, able to serve the public interest • standards of competence and conduct of members • high level of integrity by members in exercising judgement

17. What is expected of us as professional people? • demonstrating, and applying appropriately, specialist skills • providing reliable up-to-date technical knowledge and advice • complying with Profession’s code of conduct and standards • complying with legislation and regulator’s standards • performing statutory roles to a high standard • behaving ethically • exercising judgement with high level of integrity • communicating well • having due regard to the interests of those affected (continued)

18. What is expected of us as professional people? • respecting and supporting others • relationship of trust with clients (fiduciary relationship) • being reliably confidential • life-long learning – developing our knowledge and skills • having no adverse disciplinary record • assisting the profession to serve the public interest • contributing to public debate • contributing to the work of the profession

19. Some key principles of professionalism • Integrity • respect, confidentiality, honesty, openness • Competence and Care • understand the client and keep competence up-to-date • Impartiality • avoidance of bias and conflict of interest • Compliance • compliance and challenging non-compliance • Open Communication • clear, appropriate and accurate

20. IAA Core Syllabus Subject 10 – Professionalism • characteristics and standards of a profession, including need for: • specialised skill and education • ongoing training and development • high quality of advice • exercise of independent judgement • objectivity, integrity and accountability • code of conduct • discipline process • practice standards set by actuarial bodies or other stakeholders • regulatory roles of actuaries • the professional role of the actuary

21. International Actuarial Association Work on professionalism • Common understanding of principles of professionalism • International actuarial work • Development of model standards of practice • Preparation of a pack for professionalism education

22. International Actuarial Association Principles of professionalism Professionalism, for the actuarial profession, means: • The application of specialist actuarial knowledge and expertise, • The demonstration of ethical behaviour, especially in doing actuarial work, and • The actuary’s accountability to a professional actuarial association or similar professional oversight organisation.

23. International Actuarial Association Three high level principles of professionalism • Knowledge and expertise • Values and behaviour • Professional accountability

24. International Actuarial Association Knowledge and expertise An actuary shall perform professional services only if the actuary is competent and appropriately experienced to do so This principle is supported by the following four elements: • Specialist knowledge • Professional communication • Required education • Continuing professional development

25. International Actuarial Association Values and behaviour An actuary shall act honestly, with integrity and competence, and in a manner that fulfils the profession’s responsibility to the public and upholds the reputation of the actuarial profession. This principle is supported by the following five elements: • Ethical behaviour • Integrity • Independent advice • Trust and reputation • Public interest

26. International Actuarial Association Professional accountability An actuaryshall be accountable to a professional actuarial association or similar professional oversight organisation. This principle is supported by the following three elements: • Entry and qualification standards • Code of conduct • Disciplinary process

27. Standards of practice • whilst the Code of Conduct deals with broad ethical and behavioural issues… • …Standards of Practice are concerned with specific behaviours required of the actuary in relation to particular practice area applications, often in connection with statutory duties imposed on the actuary.

28. Standards of practice • neither the IAA nor the Groupe Consultatif requires Full Member Associations to issue Standards of Practice • however, if they do, they must first have in place a compliant due process for consulting on the introduction and wording of Standards of Practice.

29. Standards of practice • the Associations in North America and in the UK have issued many Standards of Practice • also in a number of other countries • in some countries actuarial standards of practice are laid down by the regulator • actuaries should take care to understand which Standards of Practice (if any) apply to any actuarial services they are providing in any jurisdiction where they are working.

30. What is going on out there? • globalization of business and commerce, WTO and G20 • demand for level playing field and transparency, including in the financial sector • Regulated Professions Task Force (reported to G20 on 11 Nov) • recommendation for global convergence of standards, including actuarial standards • International Financial Reporting Standards (IFRS) being developed by the IASB (International Accounting Standards Board) • in September 2009, G20 called “… the accounting bodies to redouble their efforts …”

31. What is going on out there? • IAIS is developing international standards for solvency regulation and supervisory purposes • Common Framework for the Supervision of Internationally Active Insurance Groups – expected to take three years to develop • financial stability issues • Own Risk Solvency Assessment (ORSA) • cooperation with banking and securities regulators

32. Why develop actuarial standards of practice? • To serve the public interest • enhance the quality of delivery of actuarial services • ensure actuarial services meet the needs of users • narrow the range of results • contribute towards harmonisation and convergence • To support professionalism • promote consistency • provide guidance on good practice • To protect actuaries • reduce the likelihood of the actuary being sued

33. What is happening now? • Due Process Task Force (DPTF) • Interim Actuarial Standards Sub-committee (of EC) (IASSC) • Develop the following standards (to be confirmed) • generic standard on data, modelling, reporting, etc. (ISAP1) • specific standard on actuarial work for IFRS4 • specific standard on actuarial work for IAS19 • specific standard for social security actuaries • specific standard on actuarial work on ERM • Task force on permanent structure for standard-setting • Groupe Consultatif will develop specific standards for Solvency II

34. Objectives of standards (IASSC paper at Zagreb) International Standards of Actuarial Practice are established to promote high quality actuarial practice globally. High quality actuarial practice: • helps serve the public interest by benefiting users of actuarial work, regulators, and participants and beneficiaries of financial security programs; and • benefits both actuarial associations and individual actuaries by providing clear guidance and enhancing the credibility of the actuarial profession.

35. Objectives of standards (IASSC paper at Zagreb) Characteristics of high quality actuarial practice include: • Consistency – providing users of the actuarial work product with confidence that practice is consistent over time and across clients subject to similar requirements; • Usefulness – adding substantial value to financial analysis; and, • Clarity – clearly articulated and understandable.

36. Exposure draft for International Standard of Actuarial Practice 1 (ASAP1) • exposure draft issued 26 July 2011 • deadline for comments is 1 December 2011 The IASSC particularly asks us to consider the following questions: 1. Is the guidance clear and unambiguous? 2. Is the guidance at the right level of detail, or should it be more or less detailed? 3. Is the guidance on when to issue an actuarial report and what should be covered in the report appropriate? 4. Are there other matters that should be included in this standard on general actuarial practice? Are there some included here that should not be? 5. The intent is to use the same format for future ISAPs. Is the format of this ISAP appropriate? 6. Is the change in nomenclature (from IASP to ISAP) appropriate?

37. Exposure draft for International Standard of Actuarial Practice 1 (ASAP1) - topics Section 3. Appropriate Practices 3.1Acceptance of Assignment 3.2Knowledge of Relevant Circumstances 3.3Employed Actuaries 3.4Reliance on Others 3.5Materiality 3.6Data Quality 3.7Assumptions and Methodology 3.8Assumption Setting 3.9Process Management 3.10Responsibility for Assumptions and Methodology 3.11 Peer Review 3.12Documentation

38. Continuing Professional Development Formally defined by the IAA as: The development of knowledge and of technical, personal, professional, business and management skills and competencies throughout a person’s working life. CPD guidelines approved by IAA Council on 2 October 2011

39. Continuing Professional Development CPD and the individual actuary CPD is an important element of the actuary’s lifelong process of learning and development within the profession. The initial qualification process is the first step in this journey. Thereafter, it is the responsibility of all actuaries to plan their own professional development programme.

40. Continuing Professional Development The importance of CPD for the individual actuary • to ensure competence for everything you do • to gain knowledge and experience • to keep up to date and stay abreast of developments • to learn about new methodologies • to develop non-technical and professional skills • to be able to move into new fields of activity • to keep up with new standards of practice and regulations

41. Continuing Professional Development CPD should include • technical skills • professionalism • personal skills • communication skills • management skills • business skills • IT skills • keeping up to date with developments

42. The IAA and its contribution to the actuarial profession:The importance of Professionalism Bogota, Colombia 21 November 2011 Chris Daykin, Chief Executive, IAA Fund