The Actuary June/July 2013 - Society of Actuaries

52 Pages·2013·39.33 MB·English

June/July 2013 Volume 10 Issue 3
HoW moDel RIsK
DeVAsTATeD

An oRGAnIZATIon
The importance of a successful ERM program

THe “eVoluTIon THesIs” oF InTeRnATIonAl
THe eVoluTIon oF THInKInG CommITTee AT WoRK
Delving deeper into actuarial thinking What are we doing, globally speaking?

‘
COVer stOrY
20 HoW ModEL risK
dEVAstAtEd An
orgAniZAtion
To have a successful ERM program,
companies must use a primary ERM
model that is practical, transparent,
flexible and realistic. A primary ERM
model lacking these qualities can
increase an organization’s exposure
to model risk … sometimes to a
devastating level.
by sim segal
FeatUres
12 uAP is not in our bEst
intErEst—A PErsonAL ViEW
The author of this article discusses
his views on the CIA’s UAP.
by bradley M. smith
14 tHE “EVoLution tHEsis”
of tHE EVoLution of
tHinKing
Many of us talk about the evolution
of thinking. Would we do better
to substitute “proliferation” for
“evolution” of thinking? This author
thinks so.
by Charalampos fytros
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June/July 2013
issue of The Actuary

Editorial
HOW WELL DO YOU KNOW
WHO WE ARE?
By lARRy sTeRn
my CAReeR As An ACTuARy spans sections, and members of the SOA staff, about a. Wright
more than 40 years. When I first started as an 80 in all—we were pre-assigned at tables of b. Newton
actuarial student, my calculator was a “clunker” eight. One of the team-building exercises was c. Holmes
Smith Corona Marchant—big, clumsy and a quiz on how well we knew who we are as d. Batten
noisy. I entered numbers by pushing buttons a profession, historically speaking. People at e. Ruskin
and hitting a key. The SCM would spin like each table worked as a group to answer the
a one-armed-bandit. After a few seconds questions. We were given about 20 minutes 2. Who was the first Canadian actuary?
the answer would appear. No computers in to complete the task. Even with all the
“those days.” What it took me to accomplish knowledge and experience in the room, it a. Ezekiel B. Elliott
in three months during my first summer as an surprised me how few of us could correctly b. Hugh Baker
actuarial student can now be completed in a answer the questions. c. John B. Cherriman
nanosecond. My, how time has flown! d. Charles McCay
I thought it would be a fun challenge for the e. William Bard
To maintain my status to render actuarial membership to take the same quiz. Your prize
opinions (and keep current on actuarial/ is the satisfaction you realize by knowing the 3. Who was the first U.S. actuary?
financial services industry activities), correct answers. (For those of you who are
I attend SOA and industry-sponsored stumped, the answers appear later in this a. Robert Patterson
meetings/seminars/conferences/webcasts edition of The Actuary. We thought about b. Nathanial Bowditch
to obtain continuing education credits. But holding them until the next edition but c. Charles Gill
every time the syllabus changes, I double waiting that long just might conjure up d. Elizur Wright
check to ensure my FSA designation has memories of waiting for exam results.) So e. Jacob Shoemaker
been “grandfathered.” I recently proctored here you go, and good luck!
an associate-level exam in my city for an 4. What year did the Society of Actuaries
individual and I have to admit, I don’t think Note: A special thank you to SOA Director of officially come into existence as an
I could have answered the first question! My, Governance Sheree Baker for compiling the incorporated body?
how times have changed! questions and researching the answers.
a. 1927
Which begs the question: how well do THe quIZ sTARTs HeRe. b. 1909
you know who we are? At a recent SOA c. 1937
Leadership Conference—those in attendance 1. Who wrote the SOA motto, “The work d. 1949
were members of the Board, Leadership of science is to substitute facts for e. 1956
Development Committee, the Nominating appearances and demonstrations
Committee, chairs and vice-chairs of all the for impressions?”
08 | THe ACTuARy | June/July 2013
5. What year was the first female actuary c. 1960 Society is measured
appointed to an actuarial position? d. 1955 by, and reflects its
e. 1952 willingness to fight
a. 1898 for, what it believes
b. 1910 Bonus: What year was the preferential ballot to be right”—
c. 1866 for president-elect introduced? Thomas P. Bowles, Larry Stern
d. 1922 Jr., SOA president 1972-73
e. 1931 10. Who was the first female president of
the SOA? C. “The Committees are the working fabric
Bonus: Who was the first female actuary? of the Society. At the present time, about
a. Anna Rappaport 500 members serve on committees. This
6. Where was the earliest actuarial club b. Daphne Bartlett is remarkable membership participation,
formed in North America? c. Emma Warren Cusman and it reflects the high esteem in which
d. Barbara Lautzenheiser we hold society membership.”—Donald R.
a. New York e. Tonya Manning Sondergeld, SOA president 1990-92
b. Toronto
c. Hartford 11. How many countries are represented 1. SOA President Vogel made
d. Philadelphia by SOA membership? statement A. True or False
e. Quebec 2. SOA President Bowles, Jr. made
a. 76 statement B. True or False
7. The name for the Society of Actuaries b. 55 3. SOA President Sondergeld made
was selected by a vote of 112 to 82. c. 42 statement C. True or False
What was the other name that was d. 87 4. SOA President Vogel made
considered? e. 94 statement A and SOA President
Bowles, Jr. made statement B. True
a. Actuarial Society Here’s some extra credit for all you or False
b. American Institute of Actuaries overachievers. Read statements A, B and C 5. All three SOA presidents made
c. Fraternal Actuarial Association before answering questions 1 through 5. each individual statement attributed
d. North American Actuarial to them. True or False
Association A. “Actuaries generally have positions of
e. Association of Actuaries considerable influence in their companies. Answers are on page 47. Well, how did you
I think it is up to us to use that influence do?
8. The Society of Actuaries’ first president wisely and for the good of the general
was: public as well as for the good of our own Until next time, may all your experiences be
… companies ... . We should remember that profitable ones. A
a. Benjamin T. Holmes in the long run what is best for the public is
b. Walter Klem what is best for the companies; otherwise Larry Stern, FSA, MAAA, is president of Canterbury
c. Henry E. Rood the companies will not survive.”—Julius Consulting LLC. He can be contacted at larry_stern@
d. Edmund M. McConney Vogel, SOA president 1979-80 earthlink.net.
e. Wendall A. Milliman
B. “If we are to mature as a public profession
9. The office of president-elect of the and … achieve the public recognition
SOA was created in what year? that we … believe we deserve, we must
tackle with intelligence, understanding and
a. 1949 mature perspective those problems which
b. 1965 fact us today. The long-term vigor of the
June/July 2013 | THe ACTuARy | 09
Letter from The President
SUPPORTING OUR
INTERNATIONAL STRATEGY
By TonyA B. mAnnInG
you HAVe HeARD quite a bit over the past faculty and students, employers, and the One professor and several students
few years from the SOA about our international media. Our purpose was to better understand expressed an interest in expanding
strategy. Simply put, the overarching goal of the needs of our members, learn what we opportunities through applying actuarial
our international strategy is to have the FSA should expect with regard to growth of the science outside of the traditional actuarial
designation be recognized as an international profession, and find out what opportunities fields, such as financial engineering or
credential that translates globally. exist for partnerships with universities, banking. We discussed how we currently
employers and local actuarial organizations. structure our courses and what changes
We know that globalization is providing might be made to allow students to be
opportunities for actuaries around the world It was both an educational and inspiring better prepared to apply actuarial science
and we are seeing a growing number of experience that helped me better understand in another complementary discipline.
candidates from outside North America taking both the region and the opportunities and I have had this same idea proposed by
our exams. We want to be sure that wherever challenges that are presented there. faculty and students at North American
our members practice, the FSA designation is universities, and it is something the SOA
accepted and appropriately recognized. unIVeRsITy VIsITs is exploring. We are already developing
During our 12 days, we visited five universities. more professional development content
Additionally, all organizations are facing It’s always energizing to be on a university that leverages leading-edge investment and
risk management challenges that can cross campus. There’s an eagerness for learning risk management content with applications
multiple disciplines. The SOA must ensure and a contagious excitement about the outside of insurance, and we will continue to
that its educational system is equipping future. The students I talked with had a expand the continuing education offerings
actuaries with the skills to address the full number of questions, and certain topics for business skills and communication
spectrum of risk management issues. That is clearly stood out as most important to them. skills. There is much more to be done
why our international strategy depends on to fully explore new paths for actuaries,
our offering general insurance (or property Students want to have a better understanding and the unique needs and opportunities
and casualty) education. of the daily responsibilities and duties of for actuaries working in Asia should be
an actuary. In addition, some were in the considered and leveraged.
To help support our international strategy, process of weighing an actuarial career with
I recently took my first trip to Hong Kong other careers, so they particularly wanted Overall, talks with the students at the
and China. Over 12 days, Ken Guthrie, SOA to know, “What are my opportunities for universities confirmed the importance of
managing director of Education, Wai Ling employment?” With the fast-paced growth of having a solid relationship with those taking
Yung, SOA program manager based in Hong the insurance industry in Asia, opportunities our exams. It is clear that the needs and
Kong, and I met with SOA members, university are expected to remain strong. expectations of exam takers are changing.
10 | THe ACTuARy | June/July 2013