CAS Professional Ethics and Standards 3 — Questions and Answers
Question 1: An actuary is simultaneously serving as a consultant to an insurer and sits on the board of a competing insurer. Under the Code of Professional Conduct, this situation primarily implicates which precept?
- Precept 2 — Competence
- Precept 6 — Disclosure of Capacity
- Precept 7 — Conflict of Interest (Correct answer)
- Precept 9 — Adverse Interests
Correct answer: Precept 7 — Conflict of Interest
Precept 7 requires actuaries to disclose and manage conflicts of interest, including situations where dual roles may compromise objectivity.
Question 2: What is the primary purpose of the Actuarial Board for Counseling and Discipline (ABCD)?
- To set actuarial exam requirements for new candidates
- To investigate complaints and counsel actuaries on professional conduct (Correct answer)
- To establish actuarial standards of practice for all disciplines
- To publish guidance on emerging actuarial methodologies
Correct answer: To investigate complaints and counsel actuaries on professional conduct
The ABCD investigates complaints against actuaries, provides counseling on ethical issues, and may recommend discipline for violations of the Code.
Question 3: An actuary providing an actuarial communication must include a 'scope and intended purpose' statement primarily to:
- Limit the actuary's legal liability
- Ensure the work product is used appropriately by its intended audience (Correct answer)
- Comply with state regulatory filing requirements
- Indicate the actuarial methods selected for the analysis
Correct answer: Ensure the work product is used appropriately by its intended audience
Defining scope and intended purpose helps ensure the work product is properly interpreted and not misapplied by users outside the intended audience.
Question 4: Under Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States, what is required for a P&C actuary to sign a loss reserve opinion?
- Fellowship in the CAS only
- ACAS or FCAS designation plus continuing education requirements (Correct answer)
- Any professional actuarial designation with P&C experience
- State licensing as an actuary in the jurisdiction of filing
Correct answer: ACAS or FCAS designation plus continuing education requirements
U.S. Qualification Standards require ACAS or FCAS membership and satisfaction of continuing education requirements to sign P&C loss reserve opinions.
Question 5: A client instructs an actuary not to disclose a particular assumption in the actuarial report because it is proprietary. The actuary believes disclosure is required by ASOPs. What should the actuary do?
- Follow the client's instructions to maintain confidentiality
- Decline to issue the report unless the disclosure is permitted (Correct answer)
- Include the disclosure using vague language to satisfy both parties
- Report the client's instruction to the ABCD immediately
Correct answer: Decline to issue the report unless the disclosure is permitted
When client instructions conflict with ASOP disclosure requirements, the actuary must either obtain permission to disclose or decline to issue the opinion.
Question 6: Which of the following is NOT a characteristic of an 'actuarial communication' as defined under ASOP No. 41?
- A written report delivered to the principal
- Oral testimony given at a regulatory hearing
- An internal memo documenting actuarial assumptions
- Preliminary data provided by a third-party vendor (Correct answer)
Correct answer: Preliminary data provided by a third-party vendor
Data provided by a third-party vendor is not an actuarial communication; actuarial communications are prepared by the actuary and convey actuarial findings or opinions.
Question 7: When a CAS actuary acts as an expert witness, which ethical obligation remains paramount?
- Loyalty to the retaining attorney's legal strategy
- Objectivity and presenting an unbiased actuarial opinion (Correct answer)
- Confidentiality of all case-related information
- Advocating for the financial position of the retaining party
Correct answer: Objectivity and presenting an unbiased actuarial opinion
Even when retained as an expert witness, an actuary must maintain objectivity and provide unbiased professional opinion regardless of which party retained them.
CAS Professional Ethics and Standards 3
An actuary is simultaneously serving as a consultant to an insurer and sits on the board of a competing insurer.
Under the Code of Professional Conduct, this situation primarily implicates which precept?