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Y
--.--
The globalizatioti
of the actuarial
Why be concerned
with other counfries?
__.^__.
profession
by Sam Gutterman
1995-96 President
Society of Actuaries
I
t is accepted wisdom that the world
is shrinking. Not geographically, of
I course, but in every other way imaginable. Is it something that affects you
me? I believe that the answer is:
,
without
a doubt.
@
A number of factors have
contributed to this shrinkage:
l
Improved communications and
technology
l
Globalization of many industries,
including financial services and
financial markets
l
Increased market share of
multi-national corporations
l
Common or similar problems
worldwide
l
More coordinated international
financial reporting in the future
I believe we can greatly benefit from
knowledge of the variety of approaches
to problem solving and of historical
perspectives that different cultures
provide.
Among the reasons you should be
interested in international topics are
the following:
1. Your country does not have a monopoly on good ideas and best practices,
lcluding cutting-edge products,
m techniques, and solutions to social,
business, and regulatory issues.
2. Your employer/client is, or might
be in the future, a multi-national
or “foreign” company.
is the reason sessions with a nonCanadian/U.S. perspective at Society
of Actuaries’ meetings are sometimes
(continued
Inside
3. You might practice in more
than one country during your
professional lifetime or later
in “retirement.”
4. Due to improvements in communication, the actuary in Taipei,
London, Buenos Aires, Capetown,
Tokyo, or Tel Aviv may be just as
accessible as the actuary down the
block, and in some cases, more
accessible.
5. In other countries, actuaries may
practice more widely in certain
practice areas, such as in banking,
investments, computers, and
politics. You could change
practice areas in the future.
The next question is, how do you
respond to this challenge? I believe you
should try to stay abreast of important
developments throughout the world.
Unfortunately, you probably don’t feel
you have enough time to keep up with
your own practice area in your own
country, let alone that of others. This
on paBe 3)
this issue
Editorial: Oppotiunity
By Bill Cutlip
.. . .. . . .. . .. . . . .. . . .. . .2
Worldwide
definition
By Roger Cod-y
of actuary.......3
I
Globalization
response
from Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
By Sofia Romnno
What in the world
By Marc Remet
is IFAA? . . . . . . . . . . . . . . . 6
IFAA brings world‘s
actuaries together
. .. .. . .. . . . .. .. . . . .. .. . . . .. 8
By Roberr Cohn
50th anniversary
By Sam Gfttterman
in Israel . . . . . . . . . . . . . . 10
Global&Ron
response
By Taknshi Mitnmurn
Helping others
By ?-UBII C/JRn~
globally
from Japan ..l 1
. . . . . . . . . . f . . . . . . . 12
lips on going international
. . . . . . . . . . . . . 14
By Kevitr Lure and Cnrolyn Ge@etman
Actuarial
counselling:
By Jnck Bram
Chapter
2 . . ...15
Call for action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
By Bob Knn
Research
Corner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
James Baker speaks at
annual meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
letters
to the editor
. . . . . . . . . . . . . . . . . . . . . . . . 22
Puxxles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
;
2
The Actuary
9 September
1996
The Newsletter
of the
Vol. 30, No. 7
l
September
1996
Bill Cutlip
Editor responsible
for this issue
Editor
Wdliam C. Curlip, FSA
[email protected]
Associate Editors
Robcn H. Dobson, FSA
[email protected]
Sue A. Collins, FSA
[email protected]
Robert J. McKay, FSA
Robert D. Shapiro, FSA
73231.102@compusen~e.com
Marc Twinney, FSA
Assistant Editors
Selig Ehrlich, FSA
Craig Kalman, ASA
74262.2543@compuscn,e.com
J. Bruce MacDonald, FSA
jbmlmacQac.dal.ca
Puzzle Editors
Louise Thicssen, FSA
[email protected]
Dan Reichcrt
Society St& Contacts
847/706-3500
Cecilia Green, APR
Director of Public Relations
[email protected]
Linda M. Dclgadillo, CAE
Director of Communications
[email protected]
Correspondence
should be addressed to
The Actuary
475 North Martingale Road, Suite 800
Schaumburg, IL 60173-2226
The Actunry is published monthly
(except July and August).
Sam Gutterman, FSA, President
Robert W. Stein, FSA, Vice President
William Carroll, FSA, Secretary and Treasurer
Robert L. Brown, FSA, Director of Publications
Nonmember subscriptions: Students, $6; Others,
$15. Send subscriptions to: Society of Actuaries,
P.O. Box 95668, Chicago, IL 60694.
Copyright 0 1996,
Society of Actuaries.
The Society ofActuaries is not
rcsponsiblc for statcmcnts made or
opinions expressedherein. All
conniburions arc subject to editing.
Submissionsmust be signed.
Printed on rccyclcd paper in the U.S.A.
.
is
The breadth of opportuni
Iix
the staff of professional
by Bill Cutlip
M
ike Cowell, outgoing editor
of The Actuary, and Sam
Gutterman, the president of
the SOA for one more month, took on
a heroic task for this month’s issue.
They solicited replies to Gutterman’s
front page story from around the globe.
Following his article, you will find
comments from the United Kingdom,
Hong Kong, Japan, Quebec, and
Mexico - in English, Chinese,
Japanese, French, and Spanish.
Read the related articles on the
IFAA, tips for becoming an international actuary, and news of Israeli
actuaries’ 50th anniversary celebration.
The global theme of this issue made
me think about how the breadth of
opportunities keeps growing for our
profession. Look back to when you
started as a student. Actuarial science was
a fairly narrow field, limited to insurance
company needs (30 years ago), and
pension plan needs (20 years ago), and
health plan needs (10 years ago), and
marketing needs (5 years ago.) Today,
we see the emergence of actuarial needs
in global planning, social programs,
banking, the legal profession, and a host
of other areas. Tomorrow’s needs and
the contributions actuaries can make in
the measurement of financial risk and the
application of actuarial principles are
limited only by our own imaginations
and our grasp of effective marketing.
The breadth of opportunity and the
potential we see is not confined to that
larger entity: “the profession.” Rather
it is something that can benefit you
personally in your daily professional
life. You may have found a very
comfortable work niche. You like your
job duties, your boss, the company,
the place you live, or other of life’s
elements important to you. But,
beware! Complacency can lead to
atrophy, out-dated knowledge, and
the lack of prepara’tion for unexpected
events. A “dinosaur” brain or “couch
potato” mentality can trap you in repetitious work. Not keeping up with the
latest information can leave you vulnerable to obsolescence. And, not being
prepared for unforseen upheavals can
leave you stunned and paralyzed if your
job or company becomes part of the
great “upheaved.”
r-7
I was talking with a long-term ASi.
recently who was trying to decide
whether to return to that torturous
road to Fellowship. He was six months
into a job he was made for, the
company was in such a growth mode
that it didn’t put much emphasis on
exams, and his boss pointed out all the
spots to work there that didn’t require
an FSA. As we talked, he was feeling
more and more comfortable with the
idea of not continuing. But when I
asked one question, his comfort bubble
burst. “What if your boss, your mentor,
your protector leaves, and the next one
wants only highly educated actuaries?”
Don’t leave yourself vulnerable to
missing out on opportunities because
you didn’t get more education. This
applies to FSAs almost more than
anyone. Just because you finished
those exams, don’t stop learning. And,
don’t just accumulate more depth in
your specialty. Learning things in other
areas will give you more breadth,
T
insights into others’ challenges, and ;
fresh perspective on what you’re doin&
(continued
on paBe 5)
The Actuary
cv
orldwide
definition
of ‘actuary’
l
September
1996
3
needed
by Roger Corley
think that those of us who have
had the privilege of meeting and
I conversing with actuaries from many
countries would readily endorse Sam
Gutterman’s theme that it is “something worth doing.” My own
experience amply bears this out.
He gives a list of reasons for
actuaries to become involved with
international actuarial topics. I think
another set of benefits should be
considered. His list might be classified
as “benefits to the individual” (and
thereby to his employer). I would also
wish to see extolled the benefits to the
community of actuaries to which we
all belong.
Clearly, if we can all set our cxperience against a broader base through
,
ving a better understanding of actual thought and practice in other
.I
countries, the whole profession will
benefit. This hardly needs stating.
However, what I would like to uncover
is the potential for some quite tangible,
but very long-term, group benefits for
ourselves and for others.
Take the altruistic “for others” tirst.
Many countries in the world are now
establishing a need for longer-term
financing and thereby for the concepts
Globalization
(continued
from
not well attended. We will, however,
continue to provide our members with
the opportunity to experience such
topics, because it is important.
However you do it, you can only gain
from adding a new international
perspective to your knowledge. Think
about the ways and means to become
more informed; everyone will give it a
erent priority. I encourage you to
4
e
and skills that actuaries can provide.
The actuarial associations of the
United Kingdom, the United States,
and some other countries with longestablished national associations are
doing much to provide training
and guidance. However, resources
inevitably fall short of the requirements. To reinforce this work, informal
contacts, meetings, invitations, and
visits can all be turned to good
account. Perhaps it is natural that those
who have learned to think internationally are at the forefront of the efforts to
establish actuaries in new territories.
The protectionist “for ourselves” is
linked with this, because as the globalization of the actuarial profession
becomes more evident, so the pressure
for common standards and practices
increases. There will, eventually, be a
single definition of an actuary worldwide. We must start considering at
what level that definition should be set.
Is it to be set only in technical terms,
or is it to embrace the essence of
professionalism and the taking of
responsibility? To make sure that it is
set at a Icvel acceptable to us, we need
to mix with others to check that their
ambitions are aligned with our own.
page
Of course, “world standards” is
what the new International Forum of
Actuarial Associations (IFAA) is all
about. But as individual members of
our respective associations, we cannot
just leave it to them. They need active
support, and they will need successors.
And, if the IFAA is to fiilfill the
promise of its very successful launch,
those successors will be actuaries who
have taken a constructive interest in the
international scene.
Roger David Corley is director,
Clerical Medical and General Life
Assurance Society in London and
a past president of the Institute
of Actuaries.
1)
think about it and act on it.
Earlier this year, the Society of
Actuaries removed reference to its
predominantly binational nature from
its Mission Statement. This was done in
recognition of the increasing percentage
of non-North American members and
the fact that most significant intellectual
and professional ideas are international
in application and scope. We will
continue to emphasize this increasing
globalization of the profession through
our communications, research and
education, and our International
Section and International Relations
Committee. I welcome your ideas on
how to accomplish this. You can e-mail
me at [email protected].
The Actuary
4
l
September
1996
r?
Globalization
profession:
of the actuarial
Response from Mexico
.
by Sofia Roman0
et me point out a few reasons why
1
we in Mexico are able to agree
with Sam Gutterman’s thesis
that the world is shrinking.
NAFTA
With this agreement, insurers of the
three signing countries will be able to
invest in the other two and establish
wholly owned subsidiaries. Actuaries
will be traveling around practicing in
the three countries, applying universal
principles and, at the same time,
complying with local regulations.
Mexican
Social Security
privatization
The Mexican Social Security System
will experience a profound reform
starting in January 1997. Private entities will play a significant role in this
new scheme. Individual savings
accounts will be created for each
worker from funds that are identified
as his. Special private organizations
Fall 1996 exam
will manage and invest these funds.
Insurance companies will pay all of
the Social Security annuities.
Actuaries will face new challenges
dealing with new risks and uncertainties, but other countries have gone
through this process in the past.
For example, Chile, Argentina, and
Colombia have previously privatized
their Social Security systems. Why
reinvent the wheel?
IFAA
The Colegio National de Actuaries is a
founding member of the International
Forum of Actuarial Associations. IFAA is
clearly a response to globalization needs.
We all will have to try to unit-y our standards, education programs, codes of
ethics, and disciplinary processes.
Foreign investment
Besides NAFTA, Mexico is clearly
open to foreign investment. An
important proportion of the insurers
preparation
Waterloo
Actuarial
Seminars
Waterloo Actuarial Seminars will offer
preparation courses for most Society
of Actuaries courses during October.
Prof. F. G. Reynolds, FSA (519/8865232) teaches the following courses
in Waterloo: 151,160, 161,220,
I-342C, I’-362U, F-385, F-485,
I-545, P-566U, F-590, V-595. He
teaches the following courses in St.
Louis: 220, G-320, I-343U, I-441U,
and I-542. Prof. K. P. Sharp, FSA,
(416/975-1850)
teaches Course 210
Chicago and Harrford. Prof. G.E.
WiIImot, FSA (519/886-5734)
teaches Course 150 in Hartford.
operating in Mexico have some
investment coming from abroad.
In summary, I want to mention
the following:
l
Globalization is not part of the
future; it exists today.
l
We have to use all modern technological tools available today in order
to improve communication.
l
We must take advantage of all the
different congresses, meetings and
seminars that includes global
themes. The International Congress
of Actuaries (ICA), sponsored by the
International Actuarial Association
(IAA), plays a key role in this
aspect. The next two ICAs are in n
Birmingham, England, in 1998
and in Cancun, Mexico in 2002.
Sofia Roman0 is secretary of the
Colegio National de Actuaries,
Mexico.
seminars
S. Broverman
Seminars
Exam preparation seminars for the
November 1996 exam period will be
held during September and October
in Chicago, New York, and Toronto
for courses 120, 130,135,140,
150,
151, and 160. For details, please
contact Prof. S. Boverman,
University of Toronto, at his
Directory address or call 416/9784453 or 416/966-9111.
Temple University
Actuarial
Institute and CAMAR Seminars
Intensive review seminars will be
offered in Philadelphia, Penn., by
Temple University Actuarial Institute
during September and October for
courses 140, 151, 160, 165,210,220.
CAMAR (Casualty Actuaries of
Mid-Atlantic Region) ol-lers these
review seminars of interest to SOA
students in September and October:
100,110,120,135,4A,
4B
(Credibility Theory & Loss
Distributions).
For more information, contact Bonnie Averbach,
Program in Actuarial Science, Ritter
Annex 475 (004-00), Temple
University, Philadelphia, PA 19122,
215/204-8153.
? \
‘7..
The Actuary
Sobalization
profesion
l
September
1996
5
de la
actuarial
para Sofia Roman0
N
OSgustaria, a traves de este
medio, seiialar solamente algunas razones por las cuales, en
Mexico, consideramos totalmente valida
su t&is acerca de que el mundo se esta
volviendo cada vez mas pequeiio:
NAFTA
Con la puesta en marcha de este
tratado, las compaiiias aseguradoras de
10s 3 paises participantes pueden invertir
en las otras dos y establecer subsidiarias
que posean totalniente. Los actuaries
van a estar viajando a 10sotros paises,
debiendo aplicar principios universales y
al mismo tiempo cumpliendo con las
regulaciones locales.
Privatizacion
de la seguridad
.mial
en Mbxico
privatizacion de la Seguridad
Social en Mexico experiementara una
profunda reforma, la cual empieza en
Enero de 1997. Entidades privadas
jugarin un papel significativo en este
nuevo esquema:
l
Se crear&n cuentas individuales
de ahorro para cada trabajador,
las cuales set-an constituidas
con sus propias aportaciones.
Organizaciones privadas especializadas administrarin e invertiran
estos fondos.
d
,/
Opportunity
(continued
from
You might even find some new opportunities down the road.
An often overlooked and underutilized area for learning is the SOA
meetings. Check out the many facets of
actuarial practice today as illustrated in
e program for this year’s annual
eting in Orlando. What a variety of
9 earning opportunities and a bounty of
new realms to explore. Of course, there
are great excuses not to go:
Las companias de seguros pagarln
todas las anualidades que se deriven
de la Seguridad Social.
.Los actuaries enfrentarln nuevos
retos al tratar con riesgos totalmene
diferentes a 10s que se usualmente se
han manejado.
Sin embargo, otros paises han
pasado por este proceso en el pasado.
Por ejemplo, Chile, Argentina, y
Colombia han privatizado ya, sus
sistemas de Seguridad Social. Porque
inventar el hilo negro y no aprovechar
la experiencia que ya se tiene?
IFAA
Nuestra organizacibn actuarial es un
miembro liuldador del Foro Intemacional
de Asociaciones Actuariales. IFAA es
una respuesta Clara a las necesidades de
globalizacion. Todos tendremos que
tratar de unificar nuestros standards,
programas de education, codigos de
ttica y procesos disciplinarios.
Inversih
estranjera
Ademls de NAFTA, Mexico esta claramente abierto a la inversion extranjera.
Una proportion importante de aseguradoras que operan en Mexico tienen
participation extranjera dentro de su
capital:
l
page
En resumen me gustaria puntualizar
lo siguiente:
La globalizacibn no forma parte
del hrturo, la estamos viviendo.
Tendremos que usar todas las
herramientas tecnolbgicas modernas
disponibles en la actualidad, de ta1
forma que optimicemos la comunication.
Tenemos que sacar provecho de
todos 10s diferentes congresos,
juntas y seminarios para incluir
temas de la globahzacion. El
Congreso International de
Actuaries (ICA) organizado por
la Asociacibn International de
Actuaries (IAA) juega un papel clave
en este aspecto. Los siguientes dos,
se&, Birmingham, Inglaterra,
1998; Can&m, Mexico, 2002.
Sofia Romano, Secretario de
Organizacion de1 Consejo Directive,
Colegio National de Actuaries,
M&ico
2)
“My company won’t pay my way.”
(Are you too frugal to invest in your
own education and future?)
. “There aren’t any sessions on my
detailed area of expertise.” (Maybe
you’re the expert and should be
presenting. Or better yet, what a
great opportunity to take a look at
something different or new.)
l
“I only go for the networking.”
(Great! Building relationships can
really pay off when you’re looking
l
for technical help or to change jobs
someday. But sneak into some of
the sessions; you’ll be surprised
what you’ll learn. And, networking
goes on there, too.)
However you choose to do it,
prepare for your future. Learn new
things. See new opportunities where
you are or elsewhere. Go to a place
where you’ve never gone before and
gain new knowledge. And keep doing
it your whole life.
6
The Actuary
l
September
1996
What in the world is IFAA?
The Canach7
perspective
by Marc Fernet
ehind these four letters - IFAA
- is an international actuarial
organization filled with promise.
The International Forum of Actuarial
Associations was founded in September
1995 as a section of the International
Actuarial Association (IAA). Contrary
to the IAA, in which individuals are
members, the membership of the IFAA
consists only of national actuarial
associations. The future will tell what
its contribution to the progress of the
actuarial profession will be, but many
possibilities are already foreseeable.
The main objective of the IFAA
is to promote the professionalism of
actuaries by requiring its member associations to adopt a code of professional
conduct, standards of practice, and a
disciplinary process. Over the years, the
actuarial profession has made slow
progress in gaining public or legal
recognition. A number of national
actuarial associations have achieved a
certain degree of recognition, but
many associations lag behind considerably. Anything that enhances the
profession’s visibility on an international level can only help these
associations. In this respect, membership in the IFAA confirms the
recognition of an association by the
international actuarial community
and is a great advantage.
This initiative offers many opportunities, the most obvious being that
many national associations will not
have to duplicate work done by other
associations to develop a code of
professional conduct, standards of
practice, and a disciplinary process. In
addition, actuaries who aim at founding a national association will be able
to draw on the assistance and experience of already established associations.
But this is only the beginning of
international cooperation among actuaries. The IFAA is already exploring
B
the possibility of being the communication channel for the international
actuarial community. This will not be
easy. Member associations will not
permit the IFAA to speak on their
behalf without the adoption of an
effective consultation process to make
sure that any public statement reflects
at least a large consensus among the
national associations. Perhaps no
satisfactory solution may be found.
However, a subcommittee is exploring
ways to establish whether there is
enough ofa common philosophy
within the profession to allow the
IFAA to speak on its behalf.
Contacts within the IFAA should
also help strengthen actuarial practice.
Actuaries in certain countries are more
focused on risk problems within traditional areas of practice, while actuaries
in other countries have a more diversified practice. Through international
communications, these two groups will
benefit from each other’s experience.
In a more distant future, communications within the IFAA may have
other consequences. Membership in
the IFAA should make it easier for
national associations to adopt reciprocal agreements that permit an actuary
to practice in other countries. Actuaries
should, in the near future, be recognized under NAFTA for practice in all
of North America. Similar agreements
would allow actuaries to practice in
many countries.
We can also expect a multiplication
of scientific communications. Up to
now, such communications have
taken place mainly through the IAA.
However, these communications are
primarily available only to members
of the IAA, who, in certain countries,
are but a small percentage of actuaries,
Without diminishing the role of the
IAA in this area, the IFAA might
eventually be able to establish
communications on a wider and more
regular basis. This would benefit the
profession, especially in areas of practice already well established in certain
countries but still considered nontraditional in other countries.
Finally, the IFAA might eventually
contribute to the education of actuaries.
Education systems differ significantly
from one country to the other, resultin
81
in unequal actuarial training. The
IFAA could prepare an inventory of
basic knowledge and techniques that
should be known to all actuaries and
from which national associations could
build their education system to fit the
particular needs of local practice. The
IFAA could also be the intermediary for
the eschange of syllabuses and educational material.
The founding of the IFAA puts the
actuarial profession well ahead of other
professions when it comes to international cooperation. Its role is still
modest, but it can be significantly
broadened if member associations find
it in their interest. The IFAA does not
exist independently of the national
associations. Therefore, it can progress
only through the witI of these associations. In return, it can help them move
quickly in many areas.
The beginning is full of promise.
Let us see the results.
Marc Fernet, with William M.
‘7
Mercer Ltd., Montreal, is the
immediate past president of the
Canadian Institute of Actuaries.
The Actuary
(te FIAA?
Qu’est-ce
l
September
1996
7
que c’est ca?
N
Par Marc Fernet
erriere cet acronyme, on trouve
une organisation actuarielle
internationale pleine de
promesses. Le Forum international des
associations actuarielles (FIAA) a et6
crCCen septembre 1995 en tant que
section de I’Association actuarielle
internationale. Contrairement a I’AAI,
les membres du FIAA sont exclusivement des associations actuarielles
nationales. II connait un debut
prometteur. Seul l’avenir nous dira
jusqu’a quel point il contribuera a
l’avancement de la profession actuarielle, mais on peut deja cntrevoir
nombre de possibilitts.
L’objet premier du FIAA est de
promouvoir le professionnalisme des
actuaires 1 l’echelle internationale en
u&rant de ses membres I’adoption
@ un code de deontologie, de normes
de pratique et d’un processus disciplinaire. Au tours des an&es, la
profession actuarielle a chemine lentement vers une reconnaissance publique
ou legale. Certaines associations actuarielles nationales ont deja obtenu une
certaine forme de reconnaissance, mais
plusieurs ont encore beaucoup d’efforts
a fournir pour y parvenir. Tout ce qui
augmente la visibilite de la profession
au niveau international ne peut que
favoriscr ces efforts. A cet egard,
I’appartenance au FIAA qui conlirme la
reconnaissance de leur association par
la communaute actuarielle internationale devient un atout pour ces
associations nationales.
Cette initiative offre beaucoup de
possibilitts. La plus evidente est que
plusieurs associations nationales
n’auront pas ?Irecommencer tout le
travail accompli par d’autres associations pour se doter d’un code de
‘ontologie, de normes de pratique et
II processus disciplinaire. kgalee
ment, les actuaires qui desirent former
une association nationale pourront
D
bentticier de I’aide et de l’experience
des associations deja Ctablies.
Mais, ce n’est la que le debut de la
cooperation internationale des actuaires. Deja le FIAA explore la possibilite
de servir de canal de communication
pour la communaute actuarielle internationale. Ce ne sera pas facile. Les
associations membres n’accepteront pas
que le FIAA fasse une declaration en
leur nom sans que soient mis en place
des mtcanismes efficaces de consultation de facon a s’assurer que la
declaration recueille au moins un large
consensus au sein des associations
nationales. 11est toujours possible
qu’on ne trouve pas une solution satisfaisante, mais une sous-commission
travaille a Ctablir s’il y a suffisamment
de communautt de pensee a I’interieur
de la profession pour que le FIAA
puisse parler en son nom.
Les contacts a I’inttrieur du FIAA
devraient aussi servir a renforcer la
pratique actuarielle. Dans certains pays,
les actuaires se concentrent davantage
sur les problemes du risque dans des
domaines traditionnels tandis que dans
d’autres pays, les actuaires ont une
pratique plus diversifiCe. Dans des
Cchanges internationaux, ces deux
groupes btneficieront mutuellement
de leur experience propre.
Dans un avenir plus lointain, on
peut envisager d’autres consequences
aux tchanges favorises par le J%AA.
En raison de leur adhesion au FIAA,
il sera plus facile pour les associations
nationales d’ktablir des ententes de
reciprocite permettant a un actuaire
de pratiquer dans d’autres pays. Les
actuaires devraient bientot obtenir une
reconnaissance mutuelle du droit de
pratique en Amtrique du Nord en
vertu de I’ALENA. Des ententes similakes permettraient a dcs actuaires de
pratiquer dans plusieurs pays.
II faut aussi s’attendre a ce que se
multiplient les &changes scientifiques
qui, jusqu’a prCsent, se sont faits principalement a travers I’AAI. 11sont certes
ett fructueux, mais ils sont restreint
essentiellement aux membres de I’AAI
qui, dans certains pays, ne representent
qu’une faible proportion des actuaires.
Sans diminuer le role de I’AAI dans ce
domaine, le FIAA pourrait etre en
mesure kventuellement d’organiser ces
echanges sur une base plus large et plus
reguliere. Ceci serait particulierement
benefique pour la profession dans des
domaines de pratique deja bien etablis
dans certains pays tar& qu’ils sont
encore consider& comme non-traditionnels dans d’autres pays.
Enfin, le FIAA pourrait tventuellement contribuer a l’tducation des
actuaires. Les sysdmes d’tducation varient considerablement d’un pays a I’autre
ce qui r&&e en une formation i&gale.
Le FIAA pourrait Ctablir un inventaire
des connaissances et techniques de base
que normalenient tous les actuaires
devraient connaitre et a partir duquel les
associations nationales pourraient
definir leur systtme d’tducation selon
les besoins propres a la pratique locale.
Le FIAA pourrait egalement servir
d’intermkliaire pour l’echange des
programmes et du materiel tducatif
entre les associations nationales.
La creation du FIAA place deja la
profession actuarielle loin en avant de
plusieurs autres professions en mat&e
de cooperation internationale. Son role
encore fort limit6 peut s’ttendre
considerablement si les associations
membres y voient leur interet. Le FIAA
n’a pas une existence independante des
associations nationales. Aussi, il ne peut
progresser que par la volonte de cellesci mais, en retour, il peut aider les
associations nationales h avancer plus
rapidement dans plusieurs domaines.
Le debut est prometteur. Voyons
la suite.
a
The Actuary
l
September
1996
IFAA meeting brings
actuaries
together
world’s
by Robert L. Collett
fall membership applications from
43 actuarial associations are eventuI ally approved, the International
Forum of Actuarial Associations
(IFAA) could someday represent 99%
of the world’s recognized actuaries.
Membership was one of the topics
reported at the IFAA at the March 17
meeting in Washington, D.C., its
second since being founded September
1995 in Brussels. Other topics discussed
by the 34 people representing 21
actuarial associations were education,
international accounting standards,
public statements, and a business plan.
Membership
The forum began with a review of
membership status. The Accreditation
Subcommittee chairperson, Walter S.
Rugland, reported that 23 associations
have been admitted to the IFAA
(21 fir11members and two in other
categories). The other 20 are awaiting
processing, still submitting needed
information, awaiting membership
status clarification or, in one case,
is not currently eligible because of
nonpayment of International
Actuarial Association dues.
Education
The Subcommittee on Education
arranged for all attendees to hear three
major presentations on new directions
for actuarial education from the
Institute of Actuaries of Australia, the
Institute of Actuaries and Faculty of
Actuaries in the United Kingdom, and
the Society of Actuaries.
The new Australian education
model has three major parts:
l
Basic actuarial building blocks
l
Defining and educating on the
“actuarial control cycle” (problem
definition, model building, results
interpretation, and then reiteration)
l
Specialization within areas of
practice. This is the only part that is
country-specific to Australia.
The U.K. presentation reviewed
its actuarial education system and the
concept of the “actuarial scientific
method.” It had much in common with
the Australian control cycle dealing with
model building, assumption setting, and
feedback. Once again, much of the
content is noncountry specific.
Speciahzation is introduced through a
Fellowship paper in one practice area.
Chris Daykin, the presenter, also
described how the Group Consultatif
(comprised of 18 actuarial associations
within the European community) have
committed to move toward a common
actuarial educational concept with
agreed-upon core objectives. This
approach still accommodates various
education approaches and mixes of academic and professional elements. The
U.K. would like to see a common core
of knowledge universally recognized
among the world’s actuarial associations.
The third presentation, from the
United States, was made by Rob Brown
and Cecil Bykerk, members of the SOA’s
Board Task Force on Education. Its
proposals completely revamp the SOA
education process. Like the Australian
and the UK presentations, it concluded
that the unique core competencies of
actuaries are the primary subjects to be
developed and enhanced through the
education process. Most importantly, the
SOA task force has concluded that our
current examination system is too big
and burdensome to be sustained into the
21st century and is not the optimum
system, in any event. In its place, the task
force proposes substituting an education
system utilizing the best available sources
for education at every level, including
relying more on the academic world for
the earliest levels of education.
International
Accounting
Standards
Committee
The International Accounting Standards
Committee (IASC) and its recent
employee benefits proposals got much
attention at the IFAA meeting. In the
past, the IASC has functioned principally as a developer of accounting
standards for countries having no
national standards. Its role has been
important, but not crucial. Its impact
on most organizations and locales has
been limited. Recently, the IASC has
been seeking a much greater role in
setting standards all around the world.
Now the International Organization
of Securities Commissions (IOSCO) /”
is backing the IASC’s expansion.
IOSCO, through its member stock
exchanges, is able to require multinational companies to comply with
international accounting standards to
be listed on those exchanges. Since
multiple sets of books are quite
burdensome, it is likely that the international accounting standards being
developed by the IASC will become
increasingly important and perhaps
ultimately of paramount importance.
While the IASC is dealing with a
whole set of accounting standards,
the one of immediate interest to
actuaries relates to retirement and
other employee benefit costs. The
IFAA has created a subcommittee to
respond to IASC proposals, with the
proposed standard on retirement and
other employee benefits getting first
priority. An article by Barry Watson
on the next page reports on the
subcommittee’s work.
Public statements
At the present time, no procedures
r‘
exist that permit the IFAA to speak OUL
on behalf of the world’s actuaries or
the member organizations. While the
The Actuary
R
ed to do so may be infrequent, if the
world’s actuaries were able to speak
with a single voice on a matter such as
the IASC proposed standard, they
clearly would have a greater impact on
influencing the direction of developments. Knowing that making public
statements may not be easy or
often needed, the IFAA created a
Subcommittee on Public Statements.
Its only assignment is to “prepare a
due process to govern the preparation
and release of public statements by the
IFAA.” The process will not become
effective unless approved by both the
IFAA committee and the council of the
International Actuarial Association.
David G. Hartman, representing the
American Academy ofActuaries, is the
U.S. member of the subcommittee.
Business plan
As a final item of business, Paul
McCrossan, current chair of the IFAA,
presented preliminary ideas about a
business plan for the IF&
including
mture IFAA activities and objectives.
It included a mission statement stating,
“The mission of the IFAA is to develop
a global profession of technically
competent and professionally reliable
actuaries who are recognized as
such.” He plans to hold discussion
of a formal business plan at the next
meeting of the IFAA in Brussels on
September 27, 1996.
After the September 1995 meeting,
I wrote an article for the International
Section newsletter, saying that I
believed the IFAA could be of great
import for the profession. I encouraged
all readers to monitor the association’s
progress. Seeing the IFAA serve as the
primary conduit for actuarial input to
the IASC, looking at the potential
)Che IFAA recognized
by Barry
as important
l
September
1996
influence on actuarial education worldwide as a result of information sharing,
and considering the new business plan,
I believe those comments were quite
appropriate. I urge your continued
monitoring. I encourage you to send
your thoughts on the IFAA to me
or any of the North American IFAA
members at our Directory addresses.
Members include Cecil Bykerk, Sam
Gutterman, David Hartman, Curtis
Huntington, Allan Kaufman, Paul
McCrossan, Walt Rugland, and
Barry Watson.
Robert L. Collett is president and
chief executive officer of Milliman
and Robertson, Seattle, Washington,
and is the SOA delegate to the IFAA.
He can be reached at by e-mail at
73231.27 @compuse~e.com
resource
Watson
The International Accounting
Standards Committee’s (IASC)
mandate to produce internationally
recognized standards for employee
benefits gave the International Forum
of Actuarial Organizations (IFAA)
an early opportunity to show its
importance in representing actuarial
interests internationally.
Background
An IASC task force distributed an
issues paper in August 1995, before
the IFAA was formed, setting out its
understanding of existing employee
benefits accounting practices and
asking for comments.
A points outline, dated February 2,
1996, showed principles on which an
exposure draft of the accounting
standard would be based. These
vere largely those of SFAS 87 and
b resented few problems for U.S.
companies, but many for companies
in other countries.
The IFAA IASC Subcommittee
appointed a working group to prepare
a response that would represent a
consensus of views of experienced
actuaries.
The IASC welcomed the IFAA
response but adopted few of its
proposals, including the one that
recommended the discount rate be
long-term to reduce volatility. Rather,
the IASC went in an opposite direction.
The major change was that asset
values should be “fair value” only,
thus increasing volatility.
The IASC Board accepted these
proposals and directed the Benefits
Task Force to prepare a draft exposure
draft, which it did in mid-May. The
IFAA working group developed
comments on certain key issues,
especially volatility.
Once again, the working group’s
input was well received, but few
changes of substance were made.
9
The draft exposure draft will be
approved at an IASC Board meeting
in mid-September. Comments can
then be made on this draft before final
approval in early 1997, but few
significant changes are likely.
The lesson to be learned? The IFAA
is urgently needed for this type of
actuarial diplomacy. A means of
formal response by the IFAA must be
adopted - and soon. Any response
must be early - “present at the
creation” is best. Assistance from
member associations in monitoring
developments and providing time
and money is critical.
It is safe to say the international
stage will not be dull.
Barry Watson is a member of the
working group of the IFM’s
IASC Subcommittee.
I0
The Actuary • September 1996
Israeli actuaries" 50th
anniversary celebration
by Sam Gutterman
1995-96 President
had the honor to represent the
Society of Actuaries at the 50th
anniversary celebration of the Israeli
Association of Actuaries (IAA) in May
on the campus of Tel Aviv University.
It was a special event, with the other
foreign guests from the United
Kingdom, Switzerland, Cyprus, South
Africa, and Canada enjoying the
wonderfial hospitality of our hosts.
A one-day seminar was a highlight.
Chris Daykin, president of the Institute
of Actuaries in the United Kingdom,
spoke on developments in social security and pensions worldwide. I led a
short discussion of the United States'
development of universal life insurance.
Throughout, the issues addressed
would have been familiar to the North
American actuary, including concern
for the lack of adequate funding of
I
social security and private pensions, low
profit margins for individual life insurance, and the future implications of
medical genetics for insurance. During
the gala dinner concluding the seminar,
David Brodet, Israel's director general
of the Ministry of Finance, spoke to the
IAA actuaries, saying that the government now recognizes the seriousness of
the country's retirement financing
problems, and it looks to actuaries for
their recommendations.
The IAA is a relatively small
actuarial society by North American
standards, with just over 100 members.
However, they more than make up for
their small size by the active participation of their members. They have
contributed to the international profession in a manner far greater than their
numbers would indicate. I thank them
and especially their current president,
Avi Bar-Or, for a very enlightening
and enjoyable meeting.
Sam Gutterman is director and
consulting actuary at Price
Waterhouse LLP, Chicago, and
be reached by e-mail at 73462.27
@compuserve.com
Sam Gutterman (far right), SOA
president, was among the invited
guests at the 50th anniversary of the
Israeli Association of Actuaries.
Others include (L-R) Andre Chuffart,
Swiss Association of Actuaries;
Ibrahim Muhanna, president of the
( ~vprus Association of Actuaries; Chris
Daykin, president of the Institute of
Actuaries (U.K.); David Brodet,
Israel's director general of the Ministry
~eFinance; Steve Handler, presidentclect of the Actuarial Society of South
Africa; and Avi Bar-Or, president of
the Israel Association of Actuaries.
The Actuary
%obalization
by Takashi Mitamuva
President, The Institute
from
September
1996
11
Japan
of Japan
would like to comment on Sam
Gutterman’s article regarding the
globalization of the actuarial profession from a Japanese perspective.
As he mentions, it is certain that the
globalization of the actuarial profession
has been and will be further promoted,
mainly due to the internationalization
of financial services. This is one of the
important trends that the Institute of
Actuaries of Japan (IAJ) recognizes. To
respond to this globalization, the IAJ
became a fir11member of the IFAA, the
International Forum of Actuarial Associations, which was established in 1995.
Activities of actuaries are largely
affected by the surrounding economic
sphere. For instance, we know of the
active interchanges of actuaries within
economic spheres such as the
uropean Union (EU) and North
America, which forms a kind of
I
I
of Actuaries
response
l
actuarial group.
In Asia, which has not been so
active, interchange of actuaries is
becoming more common in recent
years, especially within rapidly developing East Asian countries. The East
Asian Actuarial Congress has met every
two years to exchange opinions among
actuaries in those countries. Also, the
IAJ organizes the Actuarial Seminar of
East Asia every year for young actuaries
in East Asian countries. Because countries such as China and Vietnam have
a very short history in the actuarial
profession, the IAJ has an important
role as one of the actuarial associations
in Asia able to contribute to the
mutual development of the actuarial
profession in this area.
In addition, we can see the globalization of the actuarial profession even
within the IAJ. The mutual entry of life
and non-life insurance companies
through the subsidiaries was permitted
by the revision of the Insurance
Business Law that became effective in
April of 1996. This mutual entry will
further promote the interchanges of
actuaries in various industries such as
life insurance, non-life insurance, and
trust banks for both Japanese and
foreign-based companies. I expect that
this will further activate the IAJ itself.
“Unity and Diversity,” the theme
of the next International Congress
of Actuaries in England in 1998,
expresses the trend of the globalization
of the actuarial profession very well.
The IAJ, as a member of IFAA, hopes
to continue to contribute to the internationalization of actuaries and the
active interchanges of actuarial associations around the world.
The Actuary
12
l
September
1996
others
few years ago, there was serious concern that our Society
of Actuaries members in North
America would no longer enjoy “guaranteed” employment. Today, doubts
linger about the stability of traditional
actuarial jobs.
The SOA Board of Governors began
to place increasing emphasis on emerging practice areas. My responsibilities
as an SOA vice president expanded to
include those of starching for and
promoting new and diverse practice
areas suitable for actuaries.
However, diversity should not be
contined to the nature of our practices.
It also should include geographical
regions of the world. The emerging
economies of the world suffer from a
critical shortage of qualified actuaries.
I believe it is not only our obligation as
professionals, but also in our OWII best
interests to understand the need and to
find meaningful ways to help.
It is up to us to seek out opportunities with developing countries that are
rapidly building their insurance indus-
A
Richard B. Carter
ASA 1990, MAAA I993
George D. Chester
FSA 1948, MAAA 1965
Harold R Greenlee
ESA 1962, MAAA 1965
Helene Legault
ASA 1988
John Phelps
ESA 1948, MAAA 1965
Schuyler W. Tompson
FSA 1966, MAAA 1966
is helping
ours lelves
try and social insurance systems. These
countries will need skilled practitioners,
who might not even be known as actuaries. The actuarial profession is likely
to be redefined to accommodate local
needs. At a minimum, existing definitions will be moditicd, and actuarial
practice will be regulated and reshaped.
I submit that we had better bc there to
help, or we will have no influence on
the outcome.
Why is it so desirable to intluencc the
outcome? As professionals, we have an
obligation to see that the standards are
maintained for the work we do. Lower
standards in a particular location may be
needed for a short time. However, if the
situation persists, it will eventually affect
the reputation of actuaries and erode
public confidence. Then those who do
maintain a high professional standard
may find themselves at a serious
competitive disadvantage.
Worldwide maintenance of acceptable standards would inevitably result
in a shortage of qualified actuaries.
Can the implication be more obvious?
Edward A. Lew, ESA 1934, MAAA
1965, was the 1973-74 president of
the Society of Actuaries and a longtime supporter of SOA efforts. He
was chairperson cmcritus of the
Committee on Life Insurance
Research and an active member until
his death on June 20 in Punta Gorda,
Ela. He had served two terms on the
Board of Governors in the 1960s and
was a 1970-71 vice president. He was
chair of the Committee on Mortality
when it issued its 1959 Build and
Blood Pressure Study. Hc was a
founding member of the Actuarial
Research Conference and ARCH.
worlds where actunrics have not
yet been stereotyped, they have a great
opportunity to practice in many other
related fields. They can bring their
knowledge and skills to bear on many
issues and influence the outcomes in m
many parts of our world.
Just think about it!
Yuan Chang is vice president of
MetLife, China Affairs and CEO
of MetLife Hong Kong. He is a
vice president on the Society of
Actuaries Board of Governors.
In
Lew passed his Fellowship examinations at the age of 22 and spent his
entire career at Metropolitan Life
Insurance Company. He rose to the
position of vice president in 1965
and retired in 1974 after 47 years of
scrvicc. He wrote extensively for journals and was co-author with Dr. Jerzy
Gajcwski of Medical Risks (Pracger
1990), an authoritative compendium
of statistics on medical environmental
and lifestyle hazards of death.
The Actuary
l
September
by Yuan Gang
1996
13
14
The Actuary
l
September
1996
Tips on going
by Kevin
Law and Carolyn
Geigerman
any insurance companies and
consulting firms are “going
international” - expanding
their operations beyond the borders of
their own nations and increasing the
number of countries in which they operate. As various countries form economic
alliances (for example, NAFTA) and
advancing technology improves communications, actuaries will face a growing
number of challenges and career growth
opportunities. Here are some tips for
actuaries interested in jumping on the
international bandwagon.
Develop a strong foundation
in
general
actuarial
concepts
Focus on basic principles in your actuarial studies. The underlying concepts
and methodologies are likely to apply
to other countries’ markets. However,
the specifics you will encounter types of products, sources of reliable
statistics, financial reporting requirements and regulatory environments could vary significantly from North
American norms. Know the general
principles, and be prepared to use some
creativity in applying those principles
to the economic and regulatory
conditions in other countries.
learn about the international
insurance
environment
International insurance and employee
benefits present issues and challenges
that are relevant for actuaries, particularly in product development and
investments. The varying demands of
different markets and regulatory environments allow actuaries to design and
work with products that have features
unlike North America’s. It is important
to keep an open mind when you
encounter products and practices that
would be considered unconventional in
the United States and Canada.
Some government policies, such as
limitations on the flow of currency across
borders, can present complications for
multinationals. Investment strategies and
M
international
requirements may vary where
multiple economies and currencies are
involved. Special techniques need to be
applied for managing the risks associated
with fluctuations in exchange rates,
inflation, and interest rates.
Join the SOA’s International
Section
Recognizing the growing importance
of international issues, the Society
of Actuaries (SOA) formed the
International Section in October 1991.
The International
Section Newsletter
contains information on the actuarial
profession, the insurance industry, and
employee benefits in other countries.
Attending Section-sponsored sessions
at SOA meetings and volunteering for
Section activities and projects affords
you the chance to meet actuaries with
similar interests and to learn more
about international topics.
Network
with actuaries
practicing
in the international
arena
Many actuaries already engaged in
international business are happy to
share their personal experiences and
offer advice. Networking with them
greatly increases your chances of learning about job opportunities and being
considered for available positions.
Also, consider reestablishing contact
with former classmates from overseas
pursuing careers in the financial
services sector who may be able to
offer helpfill suggestions and provide
contacts.
Contact actuarial
organizations
in other countries
The SOA maintains a list of actuarial
organizations abroad. The SOA is
closely associated with the Institute of
Actuaries in England, the Institute of
Actuaries in Australia, and the Faculty
of Actuaries in Scotland, but there are
many others. Publications from foreign
associations can provide insights into
the issues facing actuaries in those
countries. Their literature may also list
available positions. If possible, attend
meetings of the actuarial organizations
to take advantage of their educational
and networking opportunities. It’s also
important to learn what qualifications
and work permits are required to practice as an actuary in other countries.
For more information on international
actuarial organizations, contact the
SOA Reference Library or consult
Actuaries
Online.
Become familiar
with
cultural
differences
Social protocols differ among countries
and regions. Knowing the regional
business etiquette can greatly enhance
working relationships and prevent
embarrassing mistakes. Certain
customs may vary considerably: the
q
emphasis placed on punctuality,
whether business meetings are
combined with cocktails or meals, and
the amount of social conversation
expected before business begins,
among others. You can learn more
about the subtleties of customs by
reading books and articles or by
consulting someone with experience
in the country of interest.
learn a second language
Bilingual actuaries are in demand.
Knowledge of a second language can
open the doors of international business.
Recruiters have even been lu~own to
look for Spanish surnames in the
Directovy in search of bilingual actuaries
to work with insurance portfolios
located in Latin America. However,
you don’t need to go so far as to change
your name to get a position. Just be
sure to include your foreign language
skills on your resume.
Although some effort and dedication are required to learn a foreign
-,
language, the benefits are many.
Actuaries have an advantage. They are not strangers to hard work and disciplined study. You might find that
(continued
on page 19)
The Actuay
a
Chapter
2: Actuarial
counselling,
l
September
1996
15
a new role
by John M. BvalZg
M
a
y article about actuarial counselling, in the March issue of
The Actrtary, resulted in an
avalanche of responses. They were
internationally oriented, coming from
the United States, Canada, and overseas. Here are some examples: “My
intention is to enter this field.” “As
an actuary who has had some formal
training in counselling, I find it a
fascinating idea. ” “An actuary who
sometimes yearns for an opportunity to
branch out.” “ How necessary it is for it
to be named. ” “I am a downsized
actuary. Your description of counselling may just save my contact with
actuarialdom.” “The idea of using my
actuarial skills to sell makes a lot of
sense and definitely appeals to me.”
This sounds like a good second career
fter retirement. ” “Actuarial counselling is precisely what I envision
myself doing on a full-time basis in
about a year or so.”
Responses from people already
doing actuarial counselling: “Am finding a real need for it. The applications
are as varied as the individuals.” (From
an FSA who sent me his Actuarial
Counsellor business card and his
brochure) “Life is full of risks.”
“Initially, I developed a software
package to assist in this work.”
Many requested the assistance kit
mentioned in the March article. I know
of at least two people who use actuarial
counselling in connection with the
installation of annuity programs on a
“fee-based” principle. (Commissions
offset fees.)
My personal experiences in the last
few months show there’s a demand for
a software program to rate and analyze
policies that are in force or proposed
and for individualized life tables and
expectancies that involve possible entitlements, usually on substandard lives.
My respondent was correct: the
applications are as varied as the individuals. But cautionary notes are in order.
Actuarial counselling is not a fillIblown thing that one can jump into
overnight. Preparation and the rounding up of clients are needed. This is a
new, relatively untried field. We’re at
the 1903 stage for automobiles. (Then,
Henry Ford couldn’t build a Taurus or
even a Model A, and he knew that the
roads were no good. But he did think
he was on to something really big.)
The organized profession, specifically the Society of Actuaries, should
actively promote actuarial counselling.
Even more specifically, the Society’s
creation, the Society of Actuaries
Foundation, should take a part in
promoting it. Actuarial counselling is
in the public interest and is therefore a
suitable subject for the Foundation.
Here are some of the things that
should be done:
l
Establish a task force.
l
Identify actuarial counsellors already
practicing.
l
Get a good handle on viable
activities.
l
Establish a registry and a central
inquiry source.
l
Advise potential user groups of the
existence of the service (Actuarial
counsellors have been told: “We
had a very hard time finding you.“)
l
Look into the possibility of institutional advertising, as is done by
other professions.
l
Determine possible licensing
and accrediting implications.
l
Start developing standards and
educational courses.
l
Determine qualifications for
actuarial counsellors.
We’re at the pioneering exploration
stage of actuarial counselling. We don’t
know whether we have struck fertile
ground or desert. But we think we’re on
the side of the angels. We have a winwin situation, both for the public and
for our own surplus actuarial population.
John M. Bragg, Bragg Associates,
Atlanta, was the 1975-76 president
of the Society of Actuaries. He
can be reached by e-mail at
75442.3555Qcompusewe.
corn
President Sam Gutterman has
announced he is forming an
Actuarial Counselling Task Force.
He invites anyone interested in
the area of practice or currently
active in actuarial counselling
to contact John M. Bragg, who
will be chair, or Judy Strachan,
education actuary at the
SOA, 847/706-3576
or
[email protected]
The Actuary
16
l
September
revduthn:
1996
A cdl for action
by Bob Katz
n one of his famous speeches in the
‘6Os, Dr. Martin Luther King, Jr.
claimed that those people who were
not recognizing the civil rights movement were “sleeping through a
revolution.” Is our actuarial profession
similarly sleeping through a social
insurance and social security revolution?
In September 1994, the World
Bank issued its landmark policy
research report, “Averting the Old Age
Crisis: Policies to Protect the Old alzd
Promote Growth.” In the foreword to
that report, the Bank’s vice president
of development economics/chief economist wrote, “ . ..Many economists and
policymakers are seeking information
and advice about old age security
arrangements. But there are still too
few who are aware of the impact these
arrangements have on such diverse
concerns as poverty, employment,
inflation, and growth.”
Is our profession seeking or
providing information and advice?
Are we part of the aware few or the
uninformed many?
The Report of the Secretary General
of the International Social Security
Association on the 25th General
Assembly, “Developments and Trends
I
U. of Iowa
seeks faculty
pplications are invited for a
tenure track faculty position
in actuarial science in the
Department of Statistics and Actuarial
Science at the University of Iowa
(http://www.stat.uiowa.edu).
Assistant professor level is planned,
but an exceptional candidate will be
considered regardless of rank.
A
in Social Security, 1993-1995,”
contains the following significant
quote: “...The major developments can
be summarized under a single heading:
the realization and conviction of social
security managers and decision-makers
throughout the world that change is
both inevitable and necessary.” Has
our profession been a part of that
process of change?
A call to form a new
Social Insurance
Section
Society of Actuaries President Sam
Gutterman believes that social insurance, which includes retirement,
survivor, health care, and disability
benefits, is an issue of such importance
that it would be appropriate to form n
special interest Section devoted to it.
He has asked me to initiate the
process. I told him I would be happy
to do so if enough actuaries were willing to devote the time and energy
required to form the Section and to
make it function in a meaningful way.
At the annual meeting in Orlando,
an open forum will address, “Assessing
the Old Age Crisis: the Perspective of
the Actuary and the Actuarial
Profession” (Session 28, 1:30 to 3 p.m.,
Monday, October 28). We will hear
from several actuaries who are interestcd and involved in this very critical
topic. This session can serve as a
launching pad for a more involved
actuarial profession.
If you’re coming to Orlando, and
social insurance or Social Security is on
your mind, please plan on joining in
the effort. A flyer on the Section will
be placed in your registration packet.
A table will be set up at the continental
breakfasts for you to express interest
and to meet some of the “players”
forming this Section. I look forward
to seeing you there.
You don’t have to wait for Orlando,
however, to express interest in
contributing to this Social Insurance n
Section’s formation and continuing
operation. You can be part of this
important development by calling
Lois Chinnock at the SOA office
(847/706-3524;
fax: 847/706-3599).
Robert M. Katz is senior actuary at
the World Bank in Washington,
D.C., and a member of the
International
Section Council.
He can be reached by e-mail at
[email protected].
member
Specialities in life or casualty are
welcome. Applicants must be
committed to excellence in teaching
and creative research. They should
have earned (or be close to completing) both a Ph.D. degree and either
an Associateship or Fellowship in a
professional actuarial society. The
selection begins on December 2,
1996, and continues until the position is filled. Send a curriculum vitae
and three letters of reference to
Professor James D. Brofhtt, Actuarial
Search Committee, Dept. of Statistics
and Actuarial Science, University of
Iowa, Iowa City, IA 52242. E-mail:
[email protected].
on the
lighter
side
n the June mue of The Actuary,
marathoner Mike Cowell asked /br
storiesfrom actuaries who also participated in the 100th running of the Boston
Marathon. Kirk Paulsen, actuarial
analyst at Minnesota Mutual in St. Paul
(usmmldsl@ibmmail. com), replied.
Following are some excerptsfrom his story.
I
The start o f the race saw a sudden
surge forward o f the masses, an abrupt
stop, and then a gradual m o v e m e n t
toward the line. A b o u t 2 minutes, 10
seconds later, I crossed the start line.
The first fbur miles were jammed up,
it after that I was able to move freely.
I knew I wanted to make my way
further up. I had qualified with
3 : 0 0 : 1 0 at the 1994 Twin Cities, so
my goal o f running 2:45 meant that I
would be passing quite a tr~w people.
Bv mile 2, I was already on pace, and
by mile 4 it was no longer necessary to
simulate a d o w n t o w n Boston cab
driver in traffic.
The race w o u n d t h r o u g h at least
seven communities, with each crowd
trying to outcheer the others. I cruised
the first 13 miles, very nearly clicking
off consistent 6:10's. At about 12
miles, we passed the famous Welleslev
College campus and the students (all
w o m e n ) lived up to their billing as
the loudest supporters. The}, lined the
right side o f the road for a g o o d halfmile, o f which I spent the better part
slapping hands with them on d o w n
the line. Mile 17 is the beginning o f
the three N e w t o n Hills, the last the
fabled "Heartbreak hill." It was espe~lly memorable because there were
(~ guys p o u n d i n g as hard as thev
!7
Actuaries are good sports,
too, VI
could on two sets o f
huge d n n n s about
half\ray up the hill. The
p o u n d i n g just pushed
me up. Then, s o m e o n e
in the crowd singled me
out. I was wearing my
Northwest Club running
singlet, and he yelled,
"Hey! Northwest! W h o
do you answer to? This
is the hill! Move it! G o ! "
It was quite inspiring.
T h e n the t o u g h part
- - the downhills. Thev
nearly got me. Only a
quarter o f a mile over
the crest o f Heartbreak,
my hamstrings suddenly
tightened into what
fizlt like grapefruits.
The same thing had
happened to me in the
1994 Twin Cities, and
1 just c o u l d n ' t believe it.
I slowed to what must
have been an 8 or 9
Hearing his name cheered &, onlookers hc/pcd runm'r
minute pace to try to
Kirk Paulsen make it throtc~h the tougher times ¢~'his
relax them. My disaprun in the lOOth Boston Marathon.
pointment mounted
quickly; I could see the
whole event going on
again on the fiat. The last 5 kilometers
without me. This was right next to
were t o u g h mentally. I spent the whole
Boston College. The students saw me
time telling myself I could do it,
slow d o w n and started yelling at me,
watching fbr the mile markers to pass,
"You can do it! You're fine - - come
and crunching on some Lifesavers.
o n ! " After about 30 seconds, my
With one mile to go at the giant
hamstrings releascd, and I slowly
" C i t g o " sign, I picked it up a bit and
picked up the pace.
finished ffeling strong. Finishing stats:
I concentrated on slowing on the
8 6 8 t h place, 2 : 4 6 : 4 7 official net time.
steep downhills and picking it back up
t:
18
The Actvary
l
September
1996
Recently completed
reports
The Society of Actuaries’ Task Force
on Preferred Undenvriting Keport is
based on compiled data from U.S. and
Canadian life insurance companies
responding to a survey on preferred
risk undenvriting on U.S. life insurance
business. The report presents data
received and provides the task force’s
opinions on future trends for preferred
underwriting. Copies of the report are
available from Cathy Cimo, SOA
Books Department (847/706-3526),
or from the Research Library section
on Actuaries Online.
The final report for the Group
Medical Insurance Large Claims Data
Base Collection and Analysis research
project has been approved. The
researchers assembled and analyzcd a
limited database to serve as a model for
expanded intercompany studies of
health care benefits in the future. The
study analyzed more than 171,000
large claims in two years, representing
over $10 billion in charges. The characteristics of the claimants and their
representation among the insureds
offer a new view of the catastrophic
claim and claimant. Copies are available from the SOA Books Department
(847/706-3526).
Announcements of how to obtain the
1986-92 Private Placement Bond Study
and the 1985-89 Group Life Study are
enclosed in this mailing.
Calls for papers and requests
for proposals
The SOA Investment Section is sponsoring a call for papers on “loo-Year
Term Structure of Interest Rates.” The
goal is to stimulate two parallel efforts:
a Practitioner’s Guide and a core of
fundamental research. It is anticipated
that the core will precipitate theoretical
research on this topic, requests for
proposals for empirical research, and
new methodologies that will be
presented in future revisions of the
Practitioner’s Guide. The Practitioner’s
Guide is expected to be published as
part of the SOA monograph series.
The core of fundamental research is
expected to be published in a special
issue of the North American Actuarial
Jozrrnnl. Selected articles may also be
presented at a Society of Actuaries
seminar or meeting session. The target
date for receipt of submissions is
March 31, 1997.
Given the current trend towards
globalization, life insurance companies
and pension plans will experience
greater exposure to currency risk.
Therefore, companies and plans will
have to manage their assets and liabilities on a global basis. A call for papers
has been developed to generate
research that will assist actuaries in
evaluating currency risk. Accepted
papers are expected to be published as
part of the SOA monograph series.
The author of the paper judged to
be the best in overall quality will be
awarded an expense-paid trip to
present the paper at either the
International Congress of Actuaries in
Birmingham, England (June 7-12,
1998) or the Society of Actuaries
annual meeting in New York,
New York (October 18-21, 1998).
Submissions are due March 15, 1997.
The SOA Committee on Finance
Research announces a call for papers
on the topic of expenses in financial
analysis, addressing both business and
regulatory issues. The primary objective is to correlate traditional actuarial
practices involving expenses with the
true economic nature of expenses in
their application to financial analysis.
To receive copies of the calls
for papers, please contact Zain
Mohey-Dean, 847/706-3570,
or
102132.34l70compuserve.com.
The project oversight group is
reviewing proposals received in
response to the Asset Valuation RFP.
The proposal to be funded will be
selected by September 30. The purpose
is to construct a taxonomy ofassct
valuation methods currently in use
and estimate the prevalence of each
method. The researchers are espected
to identify factors that correlate with
_
the use of each method.
An KFP for Safest Annuity Rule:
Phase 1 - PBGC Data Analysis has
been released. Proposals are due by
September 30. The proposal to be
funded will be selected by November
15. Copies of the RFP are available
from Julie Rogers, 847/706-3556.
Conferences
and symposia
Plans are progressing for a Dec. 16-17,
1996, conference titled, “Actuarial and
Financial Modeling - Toward a New
Science” at Georgia State University.
The conference is intended to present
issues, raise questions, and stimulate
papers on developing and using
models in actuarial and financial work.
For more information, contact
Warren Luckner, 847/706-3572,
or
73462.210compuserve.com.
A fall 1997 symposium on managed
care is being planned in conjunction
with Wharton School of the University
of Pennsylvania.
Grants
Eight of the 25 proposals received
in response to the Committee on
Knowledge Extension Research
(CKER) 1996 Grants Competition
were awarded funding. In addition,
eight of the 25 applicants for the
CAS/SOA Ph.D. Grants program
received $10,000 grants for the 199697 academic year. An article on these
grants in the October Actuary will give
additional details. New CKER grant
applications are now being accepted,
with a December 2, 1996, deadline.
Resulting grants, if any, will bc
announced by April 1, 1997.
Finance activity
The preliminary results of the Study
of the Use of Derivative Instruments
by the Insurance Industry will be
presented on October 30 at the SOA
annual meeting in Orlando. See page
20 for more details.
Health benefit systems news
The Health Section and Committee on
Health Benefit Systems Research haven
each approved funding of $25,000 to
support the creation of the National
Health Information Resource Center
(NHIRC), a source of health data
information on the Internet.
The Actuary
a
The Committee on Health Benefit
Systems Research has agreed to
contribute $25,000 toward a study of
alternative health care being conducted
by David Eisenberg, M.D., assistant
professor of medicine at Harvard
Medical School.
The working group on the
Definition of Measuring Managed
Care Effectiveness is drafting a monograph outlining the issues involved in
defining a framework for evaluating the
effectiveness of managed care.
life insurance
In response to a request from the
Mexican actuarial organization,
Colegio National de Actuaries
(CONAC), the SOA is providing assistance in setting up life, annuity, and
disability experience studies. Faye
Albert, Albert Associates, has prepared
a report detailing the scope and depth
of the assistance required.
The study of Long Term Bond
ields of Life Companies with Junk
nd Portfolios has been extended to
d
elude data through 1995.
The Individual Annuitant Valuation
Mortality Table has been approved by
the project oversight group and is
being reviewed by the Committee on
Life Insurance Research. It is expected
to be approved before the September
NAIC meeting.
Tips on going
international
intensive courses - in which little
or no English is spoken - are very
effective and a lot of fun.
Be ready to seize opportunities
when they occur
Consider carefully in advance the
characteristics of the most desirable
position for you. Do you want to live
in the United States or a foreign country? How much do want to travel? Do
prefer a “srart-up” opportunity or
established operation? If you have
Retirement
systems activity
The data collection phase of the GATT
Mortality Study is complete. The total
exposure collected is almost 15 million
life-years. The researchers, led by Kathy
Elder of Frostburg State University, are
now constructing the mortality tables.
The data collection phase of the
Turnover and Retirement Rates project
is complete. Steve Kopp, University of
Western Ontario, leads the research
team that is constructing decrement
tables from this data.
The project oversight group for the
Macrodemographics Model Feasibility
Study has approved the sample draft
report submitted by Capital Research
Associates. Work is proceeding on the
final report for phase 1.
Committee
news
The Experience Studies Oversight
Subcommittee has drafted guidelines
to help those involved in preparing
experience studies carry out their
responsibilities.
Guidelines for charging for research
project products have been developed
and were submitted to the Executive
Committee for consideration. Work is
progressing on developing guidelines
to create and distribute public use
databases.
(continued
from
page
l
September
1996
19
In July, the members of CAS and
SOA Principles committees met to
develop a joint statement of general
actuarial principles. Work on this
project continues.
SOA monograph
series
The first four monographs in the SOA
monograph series are based on SOA
research projects: “Public Employee
Retirement Plans Research: Experience
Studies, Valuation Reports and
Unfunded Liabilities”; “Public Financial
Guarantee Programs”; “Valuation of
Interest Sensitive Financial Instruments”;
and “A Comparative Analysis of
Methods of Health Risk Assessment.”
Keep in touch with Research
The “Resources from Research”
brochure is available from
Judy Yore, 847/706-3573
or
76041.2336Qcompuserve.com.
It consolidates information about
SOA research activity products.
Remember to check Actuaries
Online, the SOA’s electronic bulletin
board, for requests for proposals, calls
for papers, research reports, and other
research information. You can also
contact the Research Department at
the Society’s office at 847/706-3500.
14)
preferences for particular countries or
regions, be sure to learn about social
and cultural differences. It is also a
good idea to visit an area before
making a final decision. The perfect
opportunity may only come around
once. Be prepared by thinking ahead
about these important decisions.
iBuena suerte! Bon chance!
Zj?Za 9 +fi II d B Viel gluck! %%@f%
Good luck!
Kevin Law is vice-president, group
actuary at Pan-American Life
Insurance Company in New Orleans.
He is the 1995-96 chairperson of
the International
Section of the
SOA. He can be reached by e-mail
at 73462.1100compuserve.com.
Carolyn Geigerman is an actuarial
assistant in the Group International
Department at Pan-American Life,
working with group insurance
portfolios in eight Latin American
countries.
20
The Actuary * September 1996
Annual meeting features James BakerO
he keynote speaker for this year's
annual meeting in Orlando,
October 27-30, has held several
senior government positions under
three U.S. Presidents. James A. Baker,
III, has a long record of service that
began in 1979 as President Ford's
Under Secretary of Commerce. From
1981-85, he was President Reagan's
White House Chief of Staff. From
1985-1988, he was Secretary of the
Treasury in the Reagan Administration.
He served as President Bush's
Secretary of State from 1989-1992.
A wide range of sessions, many
designed to be interactive, are available
for annual meeting attendees.
Insurance companies on the Internet,
"They Came for AIDS, They Stayed
for Liver" (Laboratory Testing), assessing the "Old Age Crisis," and an
Actuarial Circles session that offers
T
media training are just a few of the
provocative offerings.
The meeting hotel, the Walt Disney
World Dolphin and Swan, is located
in the heart of the Epcot Resort Area,
offering boundless free-time choices
and a perfect family vacation spot.
For registration information, call the
Society's meetings department,
847/706-3500.
SOA Board of Governor's
meetings in Orlando are open
to interested Society members.
The outgoing Board meets on
October 27 and the incoming
Board meets on October 29. For
more information or to request a
copy of the minutes, call the
Society office, 847/706-3500.
Jamc.~ A. l}t~k~J', III
Financial derivatives research presented at annual meeting
session at the Orlando
annual meeting moderated
by SOA Director of Research
Warren Luckner will present preliminary results of an important research
project. The project examines the use
of derivatives by insurers and the
factors that lead them to enter the
financial derivatives market. The
session is a panel discussion at 10:30
a.m., October 30.
"The increasing importance of
interest sensitive insurance products
and intensified competition from
banks, mutual fund companies, and
other financial services firms has led
insurers to search for new and innovative financial risk management
A
L, 'L
techniques," said J. David Cummins,
professor of insurance at the
Wharton School of the University
of Pennsylvania and one of the
researchers. "Many insurers have
turned to the rapidly growing
financial derivatives market to
manage various types of risk and
enhance firm value."
In addition to Cummins, the
study is being conducted by Richard
Phillips, assistant professor of risk
management and insurance at
Georgia State University, and
Stephen D. Smith, professor of
finance at Georgia State. It is funded
in part by the Society of Actuaries,
the Casualty Actuarial Society, and
Bankers Trust Company.
The project research team will
be joined on the panel by speakers
selected to provide a variety of
perspectives. They include Larry
Gorki, a state insurance regulator;
Thomas Cavity, with the life insurance investment department
perspective; and Lucien Barnett, an
investment banker. The session will
discuss the use of derivatives by both
property-liability and life insurers to
manage insurer exposure to interest
rate, foreign exchange, and equity
risk and to conduct asset-liability
management. The role of regulation
in monitoring insurer use ofderivafives also will be discussed.
The Actuary
SOA election results
Anna Rappaport has been elected the
1996-97 president-elect of the Society
of Actuaries. She is managing director
at William M. Mercer, Inc., Chicago.
Three new vice presidents were elected:
Donna R. Claire, A Norman Crowder,
III, and James J. Murphy. New Board
members are David N. Becker, Jay M.
Jaffe, Neil A. Parmenter, Julia T.
Philips, Bradley M. Smith, and Kurt K.
von Schilling.
The level of FSAs voting increased this
year two percentage points, from 37.3%
in 1995 to 39.9% of all Fellows eligible to
vote. The October issue of 7&eActztaly
will cover the election results more extensively, including Section elections.
New journal
unveiled
Enclosed in this month’s mailing is the
cover of the first issue of the Society’s
w scholarly journal, the North
a vnerican Actuarial Journal (NAAJ),
scheduled to debut in January 1997.
The NAAJ is now the Society’s only
refereed journal. Papers published will
encompass traditional work in insurance, pensions, finance/investments,
and employee benefits, and also emerging applications in public policy issues,
demographic trends, global issues, and
technology.
The “Submission Guidelines for
Authors” are on the reverse side of
the cover, along with the name of
the SOA contact.
SOA members will receive the journal as a benefit of membership, and it
will be available by subscription to the
international, scientific, academic, business, and government communities,
making it the most widely distributed
actuarial journal.
E&E alerts
The E&E department has received a
of questions recently about Exam
45. Please be aware that a candidate
&
who has credit for I-445 cannot write
I-545 for credit.
The Board Task Force on Education
has issued its second report on the
proposed new educational system.
This report was mailed to all Society
members in early September. We
would appreciate your response to the
survey questions included in the report.
If you did not receive a copy of the
report, please contact Patricia Garrity
at the Society office, 847/706-3515.
Exam F580 needs volunteers
Michel Rochette, vice chair for Exam
F-580 - Corporate Finance, seeks new
members for the committee for the
spring 1997 session. Duties begin with
question writing in October. Any FSA
is welcome, as are English, French, or
Spanish speaking members. European
and residents outside North America
are encouraged to participate.
Members must have an e-mail address.
For more information, contact
Rochette at 514/768-4449
or by
e-mail: [email protected]
Call for journal
papers
Actuaries and other interested parties
are invited to submit articles to the
Journal of Actuarial
Practice on any
subject matter related to actuarial
science or insurance. The journal
accepts technical papers, commentaries,
essays or book reviews. However, all
articles must have some relevance to
actuarial practice.
If you are interested, send a short
abstract ( 150 words or less). Five (5)
copies of the completed paper must be
submitted by November 15, 1996,
for Volume 4, Number 2 edition to
Colin M. Ramsay, Editor, Journal of
Actuarial
Practice, P.O. Box 22098,
Lincoln, NE 68542-2098. Phone
and fax: 402/421-8149;
e-mail:
[email protected]
Bowles Symposium
September
26-27
James C. Hickman has been appointed
to the Thomas P. Bowles Jr. Chair of
l
September
1996
21
Actuarial Science at Georgia State
University from September 16 to
October 18, 1996. He will host the
Bowles Symposium on September
26 - 27 as the highlight of his tenure.
Hickman, professor and dean emeritus
at the University of WisconsinMadison, is organizing the symposium
to encourage actuaries to study problems and explore questions such as:
What ethical and regulatory guidelines need to be in place if Social
Security is to be partially privatized?
How well are insurance products
such as reverse mortgages and accelerated benefits serving the public?
What changes in employment practices and employee benefits need to
be made for the productive use of
older workers?
Would larger savings increase
productivity to an extent that they
would prevent declines in real
personal income?
What are the mathematical tools
needed to model multistage benefits
systems?
The symposium faculty includes:
l
Robert L. Brown, professor and
director of Pension Research,
University of Waterloo
l
Michael J. Cowell, vice president
and corporate affairs actuary,
UNUM Life Insurance Co. of
America
l
Anna M. Rappaport, managing
director, William M. Mercer Inc.
l
Bruce L. Jones, assistant professor,
University of Iowa
l
James M. Robinson, senior consultant, Coopers 8r Lybrand LLP
l
Bruce D. Schobel, corporate vice
president and actuary New York
Life Insurance Co.
l
Andrew G. Young, Government
Actuary’s Department, London
l
Howard Young, University of
Michigan
For registration information,
contact Professor Sam Cox,
404/651-4854
or samcoxOgsu.edu.
22
The Actuary
l
September
1996
Canada’s
pension
plan
changes
may affect
saving behavior
The front-page article in the April
1996 issue of The Actuary [“Canada
makes fundamental pension change”]
contained a wealth of timely information about recent changes in Canada’s
national pension plans, as well as
intriguing insights into their histories.
W. Paul McCrossan is to be congratulated for writing it in such a way that
this relatively uninformed American
reader was able to both understand
and enjoy its content.
The final sentence, however,
presented somewhat of a contradiction.
While lawmakers may intend that
“personal responsibility for saving for
one’s own rerirement is likely to be
increasingly stressed,” won’t the new
structure (which causes those with
retirement incomes above a certain
level to forfeit their government
pensions) cause people to be likely to
spend more before retirement and save
less?Alternatively, wouldn’t we expect
retirement planners to find ways to
manipulate the relationship benveen
assetsand income to maximize government pensions and minimize the
progressive intent of the new legislation?
While this type of thinking may have
already gone into the government’s
setting of the income limits and overall
structuring of the program, it points
again to the need for actuaries to
contemplate the behavioral impact of
our decisions and recommendations.
Ben Marshall
ASA core courses
necessary
The day after sitting for actuarial Exam
200, Introduction to Financial Security
Programs, I decided to read my copy
of Contingencies, [the American
Academy of Actuaries’ magazine],
since I had an extra minute or two now
that studying was over for a few weeks.
I read the article “A Peek at the
Future.” Interestingly, a number of
court cases and legislative issues that I
had just reviewed the past few months
for the exam were mentioned in the
article. Then I read the article, “What
Is a National Retirement Income
Policy Anyway?” Guess what? My exam
covered similar details on retirement
programs and the effects of economic
insecurity. I kept on reading, noting
similar observations with respect to the
following articles:
“Demutualization
- the Other D
Word” discussed mutuals going for
profit. Course 200 covered the
differences between stock and
mutual insurance companies and
the impact of demutualization.
“Bancassurance” discussed the
future of banks as related to the
insurance industry. Again, the exam
topics included detailed material
related to the marketing of insurance products by banks (versus the
traditional agency distribution
system of insurance companies) in
the United States, Canada, and
other countries.
“Living with State Health Reforms”
discussed issues related to exam
material covering individual or
group insurance, including rating
underwriting, marketing, regulation,
and products available.
As for the interview article with
Walter Rugland, “Ask an Actuary” sorry, Mr. Rugland, maybe it will be
on next year’s syllabus.
The point is, being an actuary
involves being well versed in many
areas touched by the profession, not
just a particular area of expertise. Even
though I became an ASA in 1991
under the old rules, these observations
add validity to the fact that another
100 core credits are required to
become an ASA.
Personally, I believe taking the core
exams has enhanced my knowledge of
the profession and my abilities as an
actuary. Granted, many talented individuals became ASAs right out of
college under the old rules, but they
are missing a vital part of what it means
to be designated “actuary” when experience and nonmathematical
applications during the course of
employment are considered. I did not
consider myself a true actuary upon
completion of my first 200 credits.
Requiring the core courses for
Associateship designation is a valid and
necessary condition for the profession.
These changes should have occurred
years ago. ( I apologize to any pre1995 ASAs that 1 may have offended.)
John E. Ragan
Social
Security
funding
Krzysztof M. Ostaszewski’s letter in
the June 1996 issue raises some interesting issues. He claims the U.S. and
,---Y
Canadian social security systems are
t
both “massive negative present value ‘projects.” However, some people feel
the same way about many or most
government programs. The logical
extension of his argument is that
governments should cease levying
taxes altogether and fund their entire
operations by issuing bonds.
Let’s consider the consequences of
such a change. Government expenditures are set by political decisions made
by the people’s representatives in a
democratic government and a predominantly market economy. Under the
current system, these expenditures are
covered in part by taxes and in part by
the net proceeds from the sale of
bonds. Under the proposed system,
government income would be
composed entirely of the proceeds
from bond sales. Ostaszewski would
presumably argue that forcing government to compete in the marketplace
for all its funds would constrain the
people’s representatives from authorizing negative present value projects, to
the great benefit of the economy.
Since the government would have
no source o f income outside o f bond
sales, bonds would effectively be issued
for an indefinite period. Given this,
they would have to carry a variable
interest rate to be saleable at a reasonable price. Ultimately, the bonds
would constitute a rapidly expanding
part o f the money supply. As long as
supply and demand for the bonds
remained in balance, their presence
would have no direct effect on the
economy. However, should a need for
liquidity arise, an excess supply o f
bonds for sale by private holders could
depress their value. If this prompted a
loss in confidence, the effect on the
economy could be catastrophic.
It is possible techniques could be
developed to manipulate the supply o f
conventional money to offset changes
in the value o f government bonds, but
I wouldn't count on the ability o f
government to apply such techniques
with unfailing wisdom. The ultimate
conclusion I reach is that such a
change in the method o f funding
government would be too risky.
If we accept the current method
for funding government as a given,
Ostaszewski's argument no longer
makes sense. Government spending is
23
set by political, not market, forces.
Capacity for consumption in the
amount o f government spending will
be transferred to the government from
other sectors o f the economy in one
way or another. Effecting a portion o f
that transfer through Social Security
taxes seems entirely benign as long as it
does not result in an increase in government spending. The same capacity for
consumption will remain in the rest o f
the economy for private consumption
and investment as if another source,
such as higher general taxation or
increases in bond sales, were tapped.
Eric J. Klieber
Mike Cowell passes the hat to Bill Cutlip
fter three ),ears of managing an
award-winning publication,
Mike Cowell turned over the
~'~,~ of editor o f The Actuary to Bill
Cmlip at the summer editorial board
meeting in Chicago. Previously an
associate editor for three years, Cutlip
•i
Among Cowell's achievements while
editor 0fThe Actuary was receiving an
ward of Excellence for his
"The volunteer spirit," which
appeared in the November 1995 issue.
About 500 entries were received in this
writing category.
has been an active SOA volunteer,
serving as chair of the Program
Committee, the Committee on Career
Encouragement, and the Committee on
Management and Personal Development.
Curtis Huntington was recognized
as he left the position o f assistant
editor, after serving since 1987.
Cowell, vice president and corporate
aflhirs actuary at U N U M Life
Insurance Company o f America, won't
be retiring from SOA publications
quite yet. He's agreed to be the editor
o f the SOA's new monograph series.
Bill Cutlip (AJD is ready to try Mike Cowcll's editor's hat oil/br size as he begins his
threeTear term as editor.
24
The Actuary
9 September
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1996
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Contest Puzzle # 4
I
ACTUCROSSWORID
by Barry M. Schilmeister
he socialize (7)
Familiar princess nearly made the crown (6)
Harsh, unstructured verse about the end of time (6)
Pop’s first drawing; it left me working now and then (4-4)
Sounds perverted to help a locust? (6)
Record of army’s end follows raid that was turned back (5)
Sulky look displayed about nothing (4)
Even fleas sit, play finally (6)
Biology class initially has you in fruit (6)
The rest met, minus the first hundred (3)
Tropical tree from a California spy group (6)
Load octet from east to west (6)
Actress Thompson is a wild “Mame” (4)
Put back enclosure for Long Island flower (5)
Odd-sounding bird holding musical note; it soothes (6)
The stand in not being on time is a pattern (8)
Inspiration in promotion made me laugh (6)
Unproductive friend of Stimpy chases ice cream or candy (6)
The course is dizzying...l’m green (7)
1. Require
4.
.7.
8.
9.
10.
12.
13.
15.
16.
17.
19.
22.
23.
25.
27.
28.
29.
30.
q
Down
Across
A
1. Baseballer Stan has 100 cats, for example (7)
2. Inexperienced folks without bad habits (7)
3. The kind of song you first use to help recover7 (7)
4. Uncoiled adder is challenged (5)
5. Cowboy Gene gets confused by a mediocre math whiz (7)
6. Angry spoken expression (4)
8. Wildly impetulant egghead is next to last (11)
11. You think she has a child? (5)
14. 7ie a Highlander (5)
18,Counterfeit
replica of a measuring tool (7)
19. Law reversal left a convincing victory for 60 Minutes
correspondent (7)
20. Mercury astronaut rigs odd ring between first appearance
of sun and moon (7)
21. Crazv nut rolled die on Nickelodeon’s debut and found the
channel (5,2)
24. Shrimp boater finally in hock (5)
26. Try taking half of U.S. bill (4)
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1
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Solution to May 1996 Actucrostic:
“Surfing the intemet is an experience of dizzying proportions. Little more than a decade ago, I was being weaned from
my manual typewriter; today, at the click of a mouse, I can roam the globe for information and network with millions on any subject imaginable.” - Nelson
Luscombe, CA Magazine
‘1
j
100% Solvers-March:
S. Berlin, A. Brosseau, A. Buckley, S. Charters & D. Dobbin, G. Dreher, J. Fibiger, H. Fishman, D. Fleiss, P Gollance, M. Grover,
C. Jacoby, J. Jakielo, C. Joyner, K. Leiben, R. Link, C. Linn, J. Loffree, J. MacLean, Ft. Miller, B. Mowrey, F. Sarrel, I. Schaeffer. W. Steffen, H. Tate, P.
Thomas, B. Wolfsberger, J. Wybrew.
SIend
solutions
to: Puzzle Editor, 753 Revel1 Crescent,
Edmonton,
Alberta Canada T6R 2E6 e-mail: [email protected]
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View - Society of Actuaries

Transcription

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