CAS Update Where Weve Been, Where We Are, and Where Were Going

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CAS UpdateWhere Weve Been, Where We Are, and
Where Were Going
Midwest Actuarial Forum September 23, 2004
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Agenda

• Two Important Task Forces
• Task Force on ACAS Vote
• Task Force on Classes of Membership
• Education Initiatives
• Research Working Parties
• Your Input

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Two Important Task Forces

• Task Force on the ACAS Vote
• Should Associates have voting rights?
• All ACAS? After N Years as an ACAS?
• Stand for election to the Board?
• Hold officer positions, e.g., Vice President?
• Serve on and chair committees? Which ones?
• Task Force on Classes of Membership
• How many classes should the CAS have?
• How should these classes be defined?

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Historical Perspective of Associates

• Since 1914, two classes of membership.
• Associate/Fellow designations have changed over
  the years
• Initially, based on company responsibilities.
• Beginning in 1915, based on exams
• Number and content of exams has varied.
• Currently a two exam educational difference.
• Currently little distinction between FCAS and
  ACAS in the ability to perform professional
  actuarial services.

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Task Force on ACAS Vote

• Why are we considering this issue?
• Voting rights have not changed since inception
  and represent a time when there was a much
  clearer distinction between Fellows and
  Associates.
• A significant minority (25-30) of Associates
  have stopped taking exams. We need to recognize
  the career Associates.
• Lack of true representation for Associates,
  despite the fact that they pay full dues.
• Approval of Mutual Recognition.

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Task Force on ACAS Vote

• Right to vote should be given to members upon
  attainment of Fellowship or five years after they
  are recognized as Associates, whichever comes
  first. Right to vote should be unrestricted.
• All voting members should be allowed to stand for
  election to the Board of Directors.
• Voting Associates may hold all officer positions,
  with the exception of
• President / President Elect
• Vice President - Admissions
• Committee membership is to remain restricted to
  Fellows for Discipline, Education Policy,
  Syllabus.

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Task Force on Classes of Membership

• Why are we considering this issue?
• Current structure reflects a time when there was
  a much clearer distinction between FCAS and ACAS.
  
• Educational differences do not restrict an ACAS
  from completing assignments like those done by a
  FCAS in the US.
• Associate designation connotes lesser standing,
  even though the ACAS is fully qualified to sign
  statements of actuarial opinion.
• Two designations that each mean a fully qualified
  actuary is confusing.
• ACAS not considered qualified outside the US
• ACAS does not meet IAA fully qualified actuary
  criteria
• Not enough finance even though far above in
  other areas
• This is an issue for the AAA (single membership
  class)

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Task Force on Classes of Membership

• The Task Force recommended (May)
• Only one class of membership - Fellow.
• Certificate of Achievement in Casualty Actuarial
  Science.
• All candidates under the Code of Professional
  Conduct.
• ACAS continue to be awarded for a limited time.
• Existing ACASs awarded FCAS after completing
  exams or after five additional years have passed
• task force was split
• Ideal number of exams for Fellowship is eight
  necessary material can be reorganized to fit.

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Task Force on Classes of Membership

• In May 2004, the Board discussed the various
  transition options in the Task Force Report.
• Options ranged from
• Immediately granting FCAS to ACAS and
  discontinuing ACAS
• Completion of additional requirements
• Discontinuing ACAS after a transition period and
  putting the ACAS into run-off.
• Under no circumstances would current Associates
  lose their status as members of the CAS.

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Task Force on Classes of Membership

• Additional information was requested for the
  Boards consideration during the discussion at
  September Board Meeting.
• Survey of the Membership Advisory Panel (MAP).
• Feedback from Regional Affiliate Presentations.
• Interviews with recruiters on the effects of one
  class of membership on attracting candidates.
• Interviews with actuarial science professors.
• Feedback submitted by members.

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Task Force on Classes of Membership

• Summary of additional feedback received
• Over two-thirds (70) of the MAP agreed with TF
  recommendation of one class.
• More than three-fourths (77) disagreed with the
  TF recommendation to grant all ACAS the FCAS
  designation without additional requirements.
• Most of the feedback has indicated that one class
  of membership will not create a competitive
  disadvantage for students.
• Actuarial Science professors may disagree with
  this

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Task Force on Classes of Membership

• Board Motions at September Board Meeting
• That the Board instruct the Executive Council to
  establish a TF to propose within the next year a
  set of learning objectives by which FCAS can be
  attained
• with less material than the current exams,
• with fewer than the current 9 exams,
• while meeting the requirements of the IAA,
• while being consistent with the Centennial Goal.
  
• It is the Boards sense that this can be
  accomplished with eight exams (or seven exams
  with a workshop or seminar).

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Task Force on Classes of Membership

• Board Motions at September Board Meeting
• Inform the CAS membership of the foregoing
  action, with an indication that the Board
  supports a move to an eventual single class of
  credentialed membership, with no more new
  Associates, concurrent with the movement to a
  shorter syllabus and will seek membership
  reaction to this plan. (It is expected that the
  then-current Associates will either complete
  their remaining exams and become Fellows, or
  remain Associates until they cease their
  membership in the CAS.)

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Membership Involvement

• Board is committed to obtaining member input.
• Granting voting rights requires an amendment to
  the Constitution approved by Fellows, however,
  the Board agreed to postpone further action on
  the ACAS Vote, pending resolution of the Classes
  of Membership issue.
• Moving to one class of credentialed member may
  not require a change to the Constitution, but
  there will be a thorough exchange of ideas.

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Changes to Preliminary Education

• Current
• Prerequisites Linear Algebra and Statistics
• Exam 1 Calculus and Probability (4 hours)
• Exam 2 Interest, Economics, Finance (4 hours)
• Exam 3 Actuarial Models NOT JOINT (4 hours)
• Exam 4 Actuarial Modeling (including applied
  stats) (4 hours)

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Changes to Preliminary Education

• Approved March 2004 Board Meeting
• Starting Spring 2005
• Prerequisites Linear Algebra and Calculus
• Exam 1 Probability with Calculus (3 hours)
• Exam 2 Interest (2 hours)
• Exam 3 Actuarial Models Statistics (4 hours)
• Exam 4 Actuarial Modeling (4 hours)
• Verification by Educational Experience
  Economics, Finance, Applied Stats

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Validation by Educational Experience

• Option 1 Submit a course syllabus for approval,
  and then a grade of B- or better in the course.
• Micro and Macro Economics
• Intermediate Corporate Finance
• Regression and Time Series (could be separate
  courses)
• Option 2 Pass an acceptable exam, such as the
  AP exams for Micro and Macroeconomics, CFA exams,
  etc.
• Option 3 Pass college-level exams offered by
  the CAS. CAS committed to offering these for at
  least 2 years.
• Option 4 Other experiences.
• Courses/seminars designed specifically for VEE
  credit

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Transition

• 2000 Syllabus
• Exam 1 ? Exam 1
• Exam 2 ? Exam 2 VEE for Econ Finance
• Exam 3 ? Exam 3
• Exam 4 ? Exam 4 VEE for Applied Stats
• Pre-2000 Syllabus
• Part 3A ? VEE for Applied Stats
• Part 4A ? Exam 2
• Part 4B ? Exam 4
• Part 5A ? VEE for Economics
• Part 5B ? VEE for Finance

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Why VEE?

• Most candidates take Econ and/or Finance
• No need to examine topics that require background
  but not mastery.
• But verification is needed to meet international
  standards.
• Test questions for Applied Stats stress
  memorization rather than application.
• Our candidates need to learn how to appropriately
  apply regression and time series models to real
  data.
• This competency cannot easily be validated in a
  timed paper-and-pencil exam.

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Impact on Travel Time

• Actuarial Science majors currently graduate with
  exams.
• Unlikely to have much effect on these candidates.
• Other majors who take VEE courses in school
  benefit from learning experience.
• Candidates who did not have VEE courses in
  school
• Can tackle VEE while studying for Interest exam.
• Or between exam seasons.
• VEE pass rates on first attempt should be very
  high.

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Computer Based Testing

• First Administration for Exam 1 Expected August
  2005
• Expand to 4-6 computer-based administrations in
  2006.
• Candidate will receive results immediately
  (beginning in 2006).
• Will expand to other exams if successful.

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Modeling Workshop

• Education in risk integration techniques is
  consistent with Centennial Goal.
• DFA added to Syllabus in 2000.
• DFA taken off Part 8 in 2003 due to inability to
  test in a paper-and-pencil environment.
• Modeling Workshop Task Force established.
• Pilot a hands-on workshop experience in late
  2004.
• Consider adding this as a future FCAS requirement
  and/or continuing education opportunity.

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Research Working Parties

• Research task forces charged to produce a
  research product over a short timeframe.
• Should produce more cohesive, accessible material
  in a consistent format, through the collective,
  managed nature of the process.
• Should help the CAS effectively address
  long-standing research problems, and harness the
  research energy of individual researchers.
• Have proven to be effective research mechanisms
  for GIRO, the general insurance research
  organization of the Faculty and Institute of
  Actuaries (UK).

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Research Working Parties

• 2003-04
• Correlations and Dependencies Among All Risk
  Sources
• Executive-Level Decision-Making Using Dynamic
  Risk Modeling
• Elicitation and Elucidation of Risk Preferences
• Quantifying Variability in Reserves Estimates

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Research Working Parties

• 2004-05
• Dynamic Risk Modeling Handbook
• Public-Access DFA Model
• Bornhuetter-Ferguson - Initial Expected Losses
• Tail Factors

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I welcome your input regarding . . .

• ACAS Task Forces
• Education Initiatives
• CAS Centennial Goal
• International Issues
• CAS Role Outside Traditional P/C Insurance
• Membership
• Research and Publications
• Whats On Your Mind?
• Questions?

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• Thank You!