CAS Actuarial Standards & Ethical Guidelines 2 — Questions and Answers
Question 1: Under the CAS Code of Professional Conduct, which obligation does an actuary have when they discover a material error in a prior actuarial communication they issued?
- Notify the principal and take appropriate corrective action (Correct answer)
- Only correct the error if it affects policyholder premiums
- Wait until the next scheduled actuarial report to issue a correction
- Disclose the error solely to the state insurance regulator
Correct answer: Notify the principal and take appropriate corrective action
The Code requires an actuary to promptly notify the principal and take corrective action when a material error is discovered in a prior communication.
Question 2: ASOP No. 23 (Data Quality) requires an actuary to do which of the following when data limitations exist?
- Disclose any significant data limitations and their potential impact in the actuarial communication (Correct answer)
- Refuse to perform the actuarial work until the data is corrected
- Substitute industry data without disclosure if the supplied data is insufficient
- Report the data deficiencies exclusively to the appointing authority
Correct answer: Disclose any significant data limitations and their potential impact in the actuarial communication
ASOP No. 23 mandates disclosure of significant data limitations and their potential impact on the actuarial work product.
Question 3: Which CAS body is primarily responsible for investigating and adjudicating alleged violations of the Code of Professional Conduct by CAS members?
- The Actuarial Board for Counseling and Discipline (ABCD) (Correct answer)
- The CAS Board of Directors
- The American Academy of Actuaries Ethics Committee
- The CAS Committee on Professionalism Education
Correct answer: The Actuarial Board for Counseling and Discipline (ABCD)
The ABCD, a joint body of the major US actuarial organizations, handles counseling and discipline for alleged Code violations.
Question 4: An actuary is asked to opine on a reserve level that is below the range the actuary considers reasonable. Under the Code of Professional Conduct, the actuary should:
- Decline to issue the opinion or disclose the departure clearly in the actuarial communication (Correct answer)
- Issue the opinion since the principal's instructions take precedence
- Issue the opinion but only inform the state regulator privately
- Defer entirely to the principal's judgment without any disclosure
Correct answer: Decline to issue the opinion or disclose the departure clearly in the actuarial communication
An actuary must not issue an opinion outside a reasonable range without clear disclosure, and may need to decline the engagement.
Question 5: ASOP No. 41 (Actuarial Communications) specifies that an actuarial report must identify which of the following?
- The intended users of the report (Correct answer)
- Every assumption used in every prior study cited
- The actuary's personal net worth as a conflict-of-interest disclosure
- All competing actuarial opinions on the same subject matter
Correct answer: The intended users of the report
ASOP No. 41 requires identification of intended users so the report's scope and limitations are properly understood.
Question 6: Which precept of the CAS Code of Professional Conduct addresses the duty to maintain confidentiality of client information?
- Precept 9 (Correct answer)
- Precept 1
- Precept 4
- Precept 13
Correct answer: Precept 9
Precept 9 obligates actuaries to keep client information confidential except in specific circumstances such as legal or professional requirements.
Question 7: When an actuary provides actuarial services to a client with interests adverse to a third party, the concept of 'conflict of interest' under the Code requires the actuary to:
- Disclose the conflict to all affected principals and obtain their consent or withdraw (Correct answer)
- Automatically withdraw from the engagement without any disclosure
- Continue the engagement if the fee is reasonable
- Only disclose if the conflict involves a monetary amount exceeding $10,000
Correct answer: Disclose the conflict to all affected principals and obtain their consent or withdraw
The Code requires disclosure of conflicts to all affected principals and their consent before proceeding, or the actuary must withdraw.
CAS Actuarial Standards & Ethical Guidelines 2
Under the CAS Code of Professional Conduct, which obligation does an actuary have when they discover a material error in a prior actuarial communication they issued?