International Activities

The American Academy of Actuaries serves as the voice of the U.S. actuarial profession internationally, coordinating activities among the five major U.S.-based actuarial associations, to identify emerging international issues affecting U.S. actuaries and, where possible, to seek consensus on positions under consideration by international organizations.

As the actuarial organization with the largest membership of U.S.-based actuaries, the Academy also is committed to advancing the U.S. profession in the international arena with multilateral stakeholders concerned with insurance and actuarial matters, such as the International Association of Insurance Supervisors (IAIS), International Accounting Standards Board (IASB), Organization for Economic Co-Operation and Development (OECD) and, in particular, the International Actuarial Association (IAA). Within its overall mission to serve the public on behalf of the U.S. actuarial profession, the Academy continues to develop and provide input on actuarial issues to international stakeholders, including public policymakers and standard-setters, to ensure that the interests of U.S. actuaries are known and considered.

At the International Actuarial Association (IAA), the signature issues of 2010 involved the Academy's work to emphasize that any international standards of practice adopted through the IAA must be model standards—examples for associations or areas of the world in which few or no standards of actuarial practice exist—and that they must be voluntary, not mandatory. There also is ongoing discussion at the IAA regarding the desirability and feasibility of achieving convergence of actuarial standards around the globe.

Some of the Academy's activities at the IAA for 2010 included:

• IAA process of implementing International Actuarial Standards (IASPs)
  The IAA developed a new process two years ago for implementing model International Actuarial Standards of Practice (IASPs). The first step in the new process involves an IAA committee's responsibility to explain through a "Statement of Intent" (SOI) why a model standard is needed and what it would address.

• Insurance Accounting Committee submitted its SOI on International Financial Reporting Standards (IFRS)
  The IAA's Actuarial Standards Subcommittee of the Insurance Accounting Committee submitted a statement of intent for a model IASP. Throughout 2010, the Academy worked on responding to this SOI to ensure that any new model standard would be specific to IFRS work, and would separately address, through a different model standard, any general or generic actuarial practices (documentation, communications, data quality, etc.) that are well and thoroughly covered in existing ASOPs issued by the U.S. ASB. At the October 2010 IAA meeting in Vienna, Austria, the IAA Council, the international organization's governing body, approved the course of action that the Academy had been supporting.

• Insurance Contracts
  The Insurance Accounting Committee of the IAA is working on its response to the IASB on its insurance contracts exposure draft, which proposes International Financial Reporting Standards (IFRS) that all insurers in all jurisdictions could apply to all contract types on a consistent basis. The Financial Accounting Standards Board (FASB) also released a companion discussion paper that solicits input on how to improve, simplify, and converge the financial reporting requirements for insurance contracts.

• Systemic risk in insurance
  The IAA's Insurance Regulation Committee has established a working group to outline the actuary's role in systemic risk regulation. The paper, The Role of the Actuary in Systemic Risk Regulation, will address the source of systemic risk in financial markets, the role of regulators, and the measures of systemic risk. The paper is expected to take into account developments within various countries. A version of the paper was discussed at the Vienna meeting in October 2010, with a final version scheduled to be completed and adopted at the Sydney, Australia, meeting in April 2011.

• Guidance paper on use of scenario and stress testing
  The Solvency Subcommittee drafted a paper covering use, construction, formulation, evaluation, and analysis of stress scenarios. Comments were circulated initially after the Cape Town meeting in March 2010 with more discussion at the Vienna meeting in October.

• ComFrame—Common Framework for the Regulation of Internationally Active Companies
  The ComFrame Task Force was created recently under the IAA's Insurance Regulation Committee. The ComFrame Task Force will assist the IAIS in a five-year project to develop the common frameworks for the supervision of internationally active insurance groups to ensure that actuarial principles are realized, where appropriate, relating to matters such as solvency requirements on capital adequacy, internal models, enterprise risk management, investment, valuation of assets and liabilities, and the role of the actuary.

• Note on the Use of Internal Models
  The Solvency Subcommittee is finalizing a Note on the Use of Internal Models for Risk and Capital Management Purposes by Insurers. This note provides educational material for those responsible for constructing, using, and approving the use of models to assess and manage risk and capital within insurance enterprises (insurers). This Note also will be useful to those who rely upon the information derived from models as an aid to understanding the derivation, uses, and limitations of this information.

• Report on progress towards drafting of ERM professional standards for actuaries
  A review of the possible extension of the scope of standards in the United States to embrace enterprise risk management was commissioned by the U.S. ASB. In light of this development, an international monitoring subgroup of the IAA Enterprise and Financial Risk Committee was formed to liaise with the ASB with a goal of understanding implications for standards beyond the United States. There also is discussion of a model IASP for ERM.