June 2018

NAIC Update

By Stuart Klugman

On June 13, 2017, the NAIC reported the results of its “Study of Actuarial Credentials and Qualifications.” Among the findings were three recommendations from its consultant.

  • The three-year experience requirement (for serving as an appointed actuary) should include appropriate documentation and a mentor with specified responsibilities.
  • Consider a recertification program in which appointed actuaries periodically re-establish that their education is up-to-date.
  • Improve the definition of a qualified actuary by developing educational standards. These standards would become part of the qualification standards for an appointed actuary.

The first two items are currently being handled by the NAIC’s Casualty Actuarial and Statistical Task Force. They have floated initial proposals and received feedback. While important for all those serving or planning to serve as appointed actuaries in the U.S., they are not the focus of this article.

The third item is critical as it proposes to develop a framework by which the SOA’s General Insurance Track can be evaluated. One challenge identified with the previous review is that the qualification standards are vague, asking for education in broad areas such as “pricing.” With a more granular list and an indication of the breadth and depth expected, a more objective evaluation can be conducted. The NAIC began this project last fall. What follows is a summary of what has been accomplished and the future steps outlined in their project plan. All information presented is from public documents prepared by the NAIC.


The first step was to conduct a job analysis. One definition is “… to define practice of a profession in terms of the actuarial that new practitioners must be able to perform safely and competently at the time of licensure or certification.”The project had the following steps:

  • Convene a focus group of 10–12 actuaries, with representatives from the AAA, CAS and SOA. A consultant worked with them to identify the critical tasks and knowledge statements for appointed actuaries.
  • The consultant then created a survey based on these statements that was sent to all appointed actuaries.
  • The focus group reconvened to analyze the results and refine the statements.
  • The statements were distributed for public comment in December, 2017.

The analysis divided the knowledge statement into six categories as follows. In each case I’ve provided one sample statement from the 103 that were developed.

  1. Law (eight statements)—Key elements of tort law, tort trends, and reforms.
  2. Policy Forms and Coverages, Underwriting, and Marketing (nine statements)—Policy forms, including exposures, limits, coverage triggers, policy term and conditions, endorsements and exclusions, attachment points, and reinsurance reinstatement provisions.
  3. Reinsurance (12 statements)—Commutations and novations including definition, motivations of partners, accounting treatment.
  4. Premium, Loss, and Expense Reserves (44 statements)—Reserving methods for unearned premiums and IBNR for policies with non-pro rata earning patterns.
  5. Statutory Insurance Accounting and Role of the Appointed Actuary (28 statements)—NAIC Risk Based Capital (RBC) and relevant state laws.
  6. Professionalism and business Skills (two statements)—Decision making and communication skills.

The Task Force did not have time to do two additional tasks that are necessary before the list can be useful.

  1. Determine which of the statements apply to pre-qualification education (education that leads to fellowship, referred to as basic education in the U.S. Qualification Standard) and which should be acquired by experience and continuing education. In some cases, aspects might be split. For example, general principles in pre-qualification education while the specific rules in a given state would come later.
  2. Determine the cognitive level, breadth and depth of each statement. This guides the actuarial association with respect to the extent of coverage and the appropriate reading materials and test questions.


To complete the above two tasks and then evaluate the SOA and the CAS, the NAIC has prepared a project plan, which was released in April. From that memo:

The Knowledge Statements derived from the Appointed Actuary job analysis, … will be used to develop Educational Standards, which will provide the “depth” of knowledge. Any item not included in an educational standard but included in a knowledge statement, will be assumed to be an issue that an individual actuary may need to learn via experience or continuing education in order to be an Appointed Actuary.

The educational standards will be used to assess the syllabus and examination content of the P/C actuarial education programs.2

It contained an aggressive timeline, with the project to be completed in November 2018. As of this writing, the plan is behind schedule and it is now likely the project will extend into the beginning of 2019.

The following is a summary of the plan.

  • Form a group of subject matter experts (SMEs) to review the job analysis statements. They will recommend changes based on the feedback received from the December distribution of those statement. The NAIC will sign off on the final version.
  • The SMEs will then propose educational standards. They should be the minimum education required to sign current statements for typical lines of business and business activities. The NAIC will sign off on the final version.
  • The CAS and SOA map their current educational systems to these standards. They will propose changes to close identified gaps.
  • An iterative discussion will take place between the NAIC and the actuarial societies that will eventually lead to the NAIC determining if the education provided meets the educational standards.

At the time of this writing (early June), the SME group has just been formed and their work is about to begin. The SOA has been working with the NAIC throughout, providing feedback at each step and recommending SMEs. We are excited about the opportunity to demonstrate that our General Insurance track provides the necessary education to be a U.S. Appointed Actuary.

Stuart Klugman, FSA, CERA, Ph.D., is a senior staff fellow for the Society of Actuaries. He can be contacted at sklugman@soa.org

1 R. N. Chinn and N. R. Hertz (2010), “Job Analysis: A Guide for Credentialing Organization,” Council on Licensure, Enforcement and Regulation.

2April 4, 2018 memorandum from the NAIC to the presidents of the AAA, CAS, and SOA.