ASOP.41
ASOP stands for Actuarial Standards or Practice. ASOP 41 is titled Actuarial Communications. Much of the ASOP material is also contained in other readings. Occasionally there is an exam question directly from an ASOP that can't be found elsewhere but the ASOPs are primarily of value to a working actuary. They provide a concise summary of important principles.
Contents
Study Tips
There are 4 ASOPs: (Virtually all of the material in the ASOPs is included in higher-ranked readings.)
ASOP 41 is another example of a reading that is really just a bunch of bullet points. The PDF is 22 pages, but the main part of it is only 9 pages. Still, you can't memorize 9 pages. The strategy is to get an overall sense of of what the reading is about, then isolate specific facts that have to be memorized.
Estimated study time: 60 minutes (not including subsequent review time)
BattleTable
Based on past exams, the main things you need to know (in rough order of importance) are:
- disclosures in actuarial communications (in various difference circumstances)
reference part (a) part (b) part (c) E (2015.Spring #21) disclosures:
- actuarial report (state insurance dept) +course of action:
- non-accommodating reportdisclosures:
- any actuarial communication ++
- + The answer is the list from section (4.2)
- ++ The answer is the list from section (4.1.3)
Full BattleQuiz You must be logged in or this will not work.
In Plain English!
Intro
Did anyone else notice the bizarre statement in the 2nd paragraph of Section 1.2:
If any other ASOPs provide information inconsistent with ASOP 41, then those other ASOPs supersede ASOP 41.
This is not a good start! It means that any information provided in this ASOP is potentially false. Is it that difficult to make all the ASOPs consistent with each other? It's probably the case that most of the information in ASOP 41 is reliable – nonetheless, the statement above immediately undercuts the confidence of the reader. Now for everything I read, I'll be wondering: "Is this really true?"
Anyway, we have no choice but to proceed...
Alice's Pro Tip: The only sections of ASOP.41 you need to spend more than 10 milliseconds on are (4.1), (4.2), (4.3), (4.4). (Memorize the lists.)
Definitions
You can skip this section. There are 10 definitions and they are all obvious. (Example: Definition (2.4) states that an actuarial report is a set of actuarial documents that the actuary determines to be relevant to specific actuarial findings that are relevant to an intended user.)
Note: Section 8.1.2 of COPLFR.SAO, in its discussion of the Actuarial Report underlying the SAO, states:
- The requirements for the Actuarial Report per the Instructions are much more specific than those contained in ASOP No. 41.
For a old exam question on that topic see: (This question is part of COPLFR.)
In the most general sense, an actuarial report is a very detailed explanation of the actuary's work and would normally include the SAO, AOS, as well as further details as indicated further down in this wiki article.
- E (2016.Spring #25b)
Analysis
The full title of this section is Analysis of Issues and Recommended Practices. I've boiled each section down to it's essentials.
- (3.1) The actuary should communicate clearly with the intended user in a timely manner. (I'm glad this ASOP mentioned this because normally I write my actuarial reports unclearly. Joke.)
- (3.2) In terms of what the actuary should communicate, here's a little memory trick: DAM, which stands for Data, Assumptions, Methods.
- (3.3) If the actuary is pressed for time, they can skip the less important details that would otherwise need to be included in an actuarial report. (Use your judgment.)
- (3.4) This section talks about disclosures that are required in an actuarial report. I'm not sure why they include this section since disclosures are discussed in detail in section 4 of this ASOP.
- (3.5) - (3.8) Take a break - skip these sections. (I don't see any potential exam questions here, but it's all common sense anyway.)
Communications
This is the most important section of this reading. section (4.1) is a long, boring list of items that must be disclosed in any actuarial report.
- (4.1) It's obvious you have to state the name of the actuary doing the work, as well as the date and subject of the document. I've taken the other disclosure items listed in the reading, rearranged them, and created a memory trick: CRISIS-LQ. (See this discussion thread ← shout-out to amberxmc!)
item to be disclosed in any actuarial document example (not part of reading, but good to think about) C Conflicts of interest actuary's spouse is the CFO of the company R Risks earthquakes are unpredictable so reserves have a wide range I Intended user your momma 😄 S Scope evaluate company's year-end reserves I Info that actuary used but doesn't assume responsibility for loss estimates from a catastrophe modeler S Subsequent events data error in year-end data discovered in January - - --- L Limitations on applicability of findings applies only to lime-green, 3-door Bentleys 😄 Q Qualifications of actuary just got his FCAS - woo-hoo!!
In addition to this list, there are 3 special cases where further disclosures are required:
- (4.2) If there are assumptions/methods prescribed by law, it's common sense that your report should include
- ==> name of the law
- ==> assumptions/methods prescribed by the law
- ==> that the report-writer actually followed the law.
- (4.3) This section relates to the second "I" item in the above table: Info that actuary used but doesn't assume responsibility for. There was a question on this from 2017: (from COPLFR.)
- E (2017.Fall #24bc)
- They presented 2 scenarios and asked what information needs to be disclosed when the actuary relies on someone else's work. I've listed the different cases below, but it's probably easier just to look at the exam question. These choices come from section 3.4.4 (b):
- If the work is not material, no disclosure.
- If the work is material, then there are 3 choices:
- If the actuary agrees with the work, no disclosure. ← The examiner's report did not accept this answer. See this forum discussion.
- If the actuary doesn't agree with the work, disclose.
- If the actuary cannot judge the work, disclose.
- Now, if disclosure is required, what do you have to include? The answer is the
- ==> extent of reliance
- ==> assumptions/methods relied upon
- ==> name of the other party.
- Now, if disclosure is required, what do you have to include? The answer is the
- (4.4) Last section in this reading. All it says is that if you materially deviate from ASOP guidance, you should disclose.
mini BattleQuiz 1 You must be logged in or this will not work.
Full BattleQuiz You must be logged in or this will not work.
