Independence
Recently, I came across an actuarial report that alarmed me. It was an actuarial review/valuation (title of report was "review" but they had prepared "actuarial valuation study") of a country's social secrutiy retirement system.
Common actuarial practice for such review/valuation is to determine and select assumptions that best reflect the system going forward. This is codified into professional code of conduct/professional standard/guidance note of various established prominent professional actuarial bodies.
Yet, in this report, it was stated that the client had the final say in selecting methodology and assumptions. Clearly, the actuary wasn't given the independence they needed as it would be absurd to assume otherwise i.e. their client gave it but the actuary declined. This just reduced the actuary to a mere highly skilled technician.
Even if various caveats were inserted to clearly disclaim their responsibility in selecting assumptions (which I still disagree), there was still a major issue:
It was the government's policy to meet the shortfall if a deficit was actuarially determined. This heightens the importance of the actuary's impartiality and independence.
If the government agency is the one who chooses the assumptions as well as the costing method, you can imagine the potential mischief that can happen in the wrong hands.
I am severely disappointed in this actuary.
Common actuarial practice for such review/valuation is to determine and select assumptions that best reflect the system going forward. This is codified into professional code of conduct/professional standard/guidance note of various established prominent professional actuarial bodies.
Yet, in this report, it was stated that the client had the final say in selecting methodology and assumptions. Clearly, the actuary wasn't given the independence they needed as it would be absurd to assume otherwise i.e. their client gave it but the actuary declined. This just reduced the actuary to a mere highly skilled technician.
Even if various caveats were inserted to clearly disclaim their responsibility in selecting assumptions (which I still disagree), there was still a major issue:
It was the government's policy to meet the shortfall if a deficit was actuarially determined. This heightens the importance of the actuary's impartiality and independence.
If the government agency is the one who chooses the assumptions as well as the costing method, you can imagine the potential mischief that can happen in the wrong hands.
I am severely disappointed in this actuary.
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