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

Ananya, a Fellow actuary, serves as Appointed Actuary of an insurer and also holds a significant personal shareholding in a reinsurer that the insurer plans to use for a large treaty. She must advise the board on the treaty's suitability. Which action best manages the conflict of interest?

She should disclose the shareholding to the board and either withdraw from advising on the treaty or put clear safeguards in place, such as independent review. Conflicts must be disclosed to the party relying on the advice and managed, not hidden, delayed or answered with biased advice.

  1. AAdvise without mentioning her shareholding, as it is her private matter
  2. BDisclose the interest to the board, and either withdraw from that advice or put clear safeguards in place, such as independent reviewCorrect
  3. CSell the shares only after the treaty is signed and then advise
  4. DAdvise in favour of the reinsurer to avoid appearing biased against it
  5. Disclose the interest only to the reinsurer

Explanation

A conflict must be identified and disclosed to the affected party, here the board, and managed by withdrawal or safeguards. Concealing it, delaying action, or disclosing to the wrong party fails the duty of integrity. Favouring the reinsurer to look unbiased is itself biased.

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