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IAI Actuarial Core Principles · Business Management · Skills and knowledge for working as an actuary in financial services

An actuary is preparing a written report on reserve adequacy for a client's management. Which feature is most important for the report to be fit for its purpose?

The report should clearly state key assumptions, limitations and uncertainty in terms the intended reader can understand and act on. Fitness for purpose depends on clarity and transparency, not length, uniform formats, concealing uncertainty or shaping conclusions to management's preferences.

  1. AIt should be as long as possible so that no assumption is left out
  2. BIt should state the key assumptions, limitations and uncertainty in a way the intended reader can understand and act onCorrect
  3. CIt should avoid mentioning uncertainty so management gains confidence
  4. DIt should use the same format for every client regardless of their needs
  5. It should be written only after management has indicated the result it prefers

Explanation

Good actuarial reports are clear, relevant to the reader and transparent about assumptions, limitations and uncertainty. Length alone does not help, hiding uncertainty is misleading, and tailoring results to preferences breaches professional standards.

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