By Achille Sime
I have the qualifications to sign Property and Casualty Statements of Actuarial Opinion in the U.S. However, in order to receive those qualifications I had to get approval through the American Academy of Actuaries’ Casualty Practice Council Procedures for Reviewing Qualifications for Signing the NAIC Property and Casualty Annual Statement Loss Reserve Opinion (herein referred to as the CPC Review Process). In this article, I outline the CPC Review Process and relate my experiences with it. However, before I get into this, I would like to provide some background on myself and why I had to go through this process.
BACKGROUND
In a 2015 SOA blog post, I was introduced to the world as the first FSA through completion of the SOA’s General Insurance (GI) track. However, my experience with the CPC Review Process started well before that.
In 2002, I began my career as a GI actuary in France. I completed my Fellowship with the Institut des Actuaires (FIAF) in 2006. After relocating to the U.S. that same year, I was later promoted to opining actuary for a run-off entity for which I had served as actuarial manager. While I performed the work of the opining actuary at that time, I was unable to sign the opinion. The signing was done by an actuary who met the signing requirements for the NAIC Property and Casualty Annual Statement Loss Reserve Opinion (NAIC P/C Opinion). At that time, there were only two ways to meet the signing requirements—either be a member of the Casualty Actuarial Society (CAS) or be approved through the CPC Review Process.
In 2011, I needed to be the signing actuary for the company I was working for as the opining actuary. As I was not a CAS member, I needed approval through the CPC Review Process. Beginning in 2011, I went through the CPC Review Process three times at different points in my career. In order to provide context, I will describe the review process in general and then relate it to my experiences.
Note: In 2019, the SOA’s GI track was recognized as an NAIC Accepted Actuarial Designation, meeting NAIC standards of a qualified actuary to sign the NAIC Property & Casualty (P&C) Annual Statement of Actuarial Opinion (SAO).[1] The Academy is currently considering necessary revisions to the specific qualification standards for alignment with the NAIC’s determination regarding the SOA’s GI track.
THE CPC REVIEW PROCESS
In order to sign the NAIC P/C Opinion, one needs to ensure compliance with the regulatory requirement in the NAIC instructions.
In 2011, the regulatory requirement in the NAIC Instructions was as follows:
“Qualified Actuary” is a person who meets the basic education, experience and continuing education requirements of the Specific Qualification Standard for Statements of Actuarial Opinion, NAIC Property and Casualty Annual Statements, as set forth in the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States, promulgated by the American Academy of Actuaries, and is either:
- (i) A member in good standing of the Casualty Actuarial Society; or
- (ii) A member in good standing of the American Academy of Actuaries who has been approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries.
The Academy’s Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States (U.S. QS), includes both a General Qualification Standard (GQS) and a Specific Qualification Standard (SQS). The GQS is required for actuaries issuing any statement of actuarial opinion. Both the GQS and the SQS are required for actuaries signing the NAIC P/C Opinion.
The SQS is found in Section 3 of the U.S. QS. It’s split into three requirements: Basic Education, Experience and Continuing Education. The CPC Review Process is organized into these same three parts. An applicant must provide documentation that outlines how they meet the requirements.
Note: Prior to 2011, being a CAS member in good standing was sufficient to be qualified to sign the NAIC P/C Opinion. That is, an ACAS was considered sufficient. However, in 2011 the CAS made changes to its syllabus of examinations. With these changes, qualification required ACAS plus one of the fellowship exams. Under the current CAS syllabus of examinations, ACAS plus CAS exam 7 is required to be considered qualified to sign the NAIC P/C Opinion.
CPC Review, Part I—Education
The CPC Review Process identifies the GQS and SQS education requirements for applicants. The GQS includes an explicit education requirement as follows:
“Be knowledgeable, through examination or documented professional development, of the Law applicable to the Statement of Actuarial Opinion.”
The SQS education requirement for the NAIC P/C Opinion identifies the following syllabus topics from the CAS examinations:
- Policy forms and coverages, underwriting and marketing;
- principles of ratemaking;
- statutory insurance accounting and expense analysis;
- premium, loss and expense reserves; and
- reinsurance.
The applicant must show successful completion of the applicable CAS exams or “the applicant may satisfy the education requirement by acquiring comprehensive knowledge of the applicable syllabus topics through responsible work and/or self-study.”
Under the alternative to taking CAS exams, the CPC Review Process notes that the applicant should describe how they have “obtained the comprehensive knowledge of the applicable law and each of the applicable syllabus topics through examinations and/or through responsible work and study necessary to satisfy the education requirement” and provide a written statement from an actuary qualified to sign an NAIC P/C Opinion that attests to the applicants knowledge of the SQS education requirements.
For knowledge obtained from passing formal examinations, the applicant should include details such as the examining authority, the exam, the date the exam was passed, and the syllabus for the exam.
The CPC Review Process requires applicants to identify any limitations on the knowledge the candidate has obtained that the review should consider. This could include limitations on lines of business or knowledge limited to specific insurers.
CPC Review, Part II—Experience
Both the GQS and SQS include an education requirement. The CPC Review Process identifies the SQS education requirement for which the applicant must provide evidence of compliance.
The SQS experience requirement is “that the actuary 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.”
In order to satisfy this part of the CPC Review Process, the applicant must provide the following:
- A detailed description of the relevant experience including examples of opinions. Any limitations on experience (e.g., lines of business, specific companies) should also be noted.
- A written statement (or statements) from an actuary (or actuaries) qualified to sign an NAIC P/C Opinion that attests to the applicant’s relevant experience. The actuary of actuaries providing this may be “a superior, subordinate, peer, or outside consultant.”
The CPC Review Process also encourages the applicant to provide copies of any relevant opinions prepared by the applicant.
Finally, applicants are required to state whether or not they have signed a Property and Casualty opinion in the past 10 years. If they have, then they should “identify the company, describe the circumstances of their signing of such an opinion, and identify the source of the approval they received to sign such an opinion.” If disclosure of this information is prohibited, the applicant must identify the applicable law, rule, or regulation that prohibits disclosure.
CPC Review, Part III—Continuing Education
The U.S. QS provide continuing education requirements. They are specified in both the GQS and SQS. The SQS includes all the GQS requirements plus an additional requirement specific to the opinion.
The SQS minimum requirement for continuing education is as follows:
“Thirty credit hours per year of relevant continuing education activities are necessary to satisfy the continuing education requirement, including a minimum of 15 credits directly relevant to the topics listed in Part I. A minimum of six of the 15 credits must be obtained through ‘organized activities,’ as defined in the U.S. QS, and a minimum of three hours must cover professionalism topics.”
Applicants must submit copies of their continuing education records for the past two years. The applicant may elect to submit records for prior years as well.
MY CPC REVIEWS
2011 Review
My 2011 application to the CPC Review Process documented my education as an IAA fully qualified actuary, my experience with emphasis on the run-off entity for which I had served as actuarial manager, and my compliance to continuing education requirements.
The review concluded with a limited scope approval. I was approved to serve as the appointed actuary for the run-off entity and only for as long as that company remained in a run-off status. The CPC Review Process decided that my application did not demonstrate comprehensive knowledge in some areas of the education requirement for some of the required syllabus topics from the CAS exams. It also noted my experience was insufficient to allow a broader approval based on the application that was submitted.
2016 Review
In 2013, the SOA began administration of the GI track for fellowship. In 2015, I obtained my FSA through the SOA’s GI track. I then submitted another application to the CPC for a broader approval of qualification. The new application presented additional evidence in the following areas:
- Education: Documentation of my completion of the SOA GI track requirements with emphasis on the coverage of the required syllabus topics. This documentation also included additional reference letters from actuaries qualified to sign the NAIC P/C Opinion who were familiar with my knowledge and educational background.
- Experience: Documentation of my experience since the 2011 Review with emphasis on actuarial or loss reserve specialist opinions that I had signed. This documentation also included additional reference letters from actuaries qualified to sign the NAIC P/C Opinion who were familiar with my experience.
- Continuing Education: Documentation of my compliance with requirements for the period from 2011 to 2016.
The review concluded with a full scope approval. That is, I was approved to serve as appointed actuary for any Property & Casualty company. However, this approval included a three-year limitation. The CPC noted that this was for me to build a track record of performance for NAIC P/C Opinions that I could provide to them after the three-year period in a future application.
2019 Review
Following the 2016 Review, SL FINANCIAL, the actuarial consulting firm I established, expanded service offerings to include rate filing and loss reserve opinions in different domiciles in the U.S., Bermuda, Cayman Islands, Barbados, and several countries in Africa. SL FINANCIAL also took on assignments with local governments and regulators in areas of self-insured funding analysis, regulatory rate filing reviews and risk-focused financial examinations. In addition to this, I was selected as one of the subject matter experts for the NAIC Appointed Actuary Job Analysis Project in 2017 and the NAIC Standard and Assessment Project in 2018.
In 2019, I submitted another application as my limited approval was expiring. I was seeking a broader approval without limitation as to time or content. The new application presented evidence in the following areas:
- Education: Additional reference letters.
- Experience: Experience since 2016, with emphasis on NAIC P/C Opinions signed between 2016 and 2018, along with additional reference letters.
- Continuing Education: Documentation of my compliance with requirements for the period from 2016 to 2018.
My 2019 Review concluded with a full scope approval with no limitations. This formalized my qualification to sign any NAIC P/C Opinion. As is the case with any actuary qualified to sign an NAIC P/C Opinion, I must keep documentation of my compliance with continuing education requirements.
FINAL NOTES
Going through the CPC Review Process requires attention to detail regarding the documentation provided and patience to allow the CPC time to perform their review.
While actuaries tend to keep detailed electronic records of continuing education, detailed summarized records of experience may not be readily available. This could involve some work putting it together depending on the amount of experience involved and how long ago the experience occurred.
In 2019, the NAIC recognized that FSAs from the SOA’s GI track meet the NAIC standards of a qualified actuary to sign the NAIC P/C Opinion. The NAIC has edited the Annual Statement Instructions to reflect this. The Academy’s U.S. QS have not yet been edited to reflect this—they have remained unchanged since 2008. As it now stands, there is a disconnect between the NAIC’s regulatory requirements and the Academy’s U.S. QS The Academy is currently considering necessary revisions to the specific qualification standards for alignment with the NAIC’s determination regarding the SOA’s GI track. .
The CPC Review Process remains in place as it provides a means for those that are not formally educated through CAS exams or the SOA GI track exams to be able to sign the NAIC P/C Opinion. In order to demonstrate qualification to the CPC, one just has to provide sufficient documentation that they have the required education and experience.[2]
Achille Sime, FSA, CERA, FIAF, MAAA, Affiliate of the CAS, is the principal/CEO of SL FINANCIAL, an actuarial consulting firm located in Florida. He can be contacted at asime@sl-financial.com.
[1] Pending modest agreed upon updates to the GI track curriculum. These changes were made in time for the SOA’s Fall 2019 Exams. Also, an FSA in the GI track must elect the two-hour Advanced Topics in General Insurance Exam and the U.S. version of the five-hour Financial and Regulatory Environment Exam to meet the NAIC standards.
[2] Providing documentation showing one is current on the continuing education requirements is also required.