IAI Actuarial Core Principles · Business Management · Skills and knowledge for working as an actuary in financial services
Bharat Pension Trust employs an actuary to value its defined benefit scheme. The trustees ask the actuary to explain the result at their meeting, but the trustees have no mathematical background. Which approach best meets the actuary's communication responsibility?
The actuary should give a plain-language summary of the funding position, key assumptions, main risks and recommended actions, supported by a full technical report. Clear communication that the audience can understand and act on is part of the actuary's responsibility, and withholding sensitivities would mislead.
- AProvide a technical report only, since trustees are expected to seek their own interpretation
- BPresent a short summary in plain language covering the funding position, key assumptions, main risks and recommended actions, supported by a full technical reportCorrect
- CGive only the single funding ratio so as not to confuse the trustees
- DWithhold the sensitivity of results to assumptions because it may cause alarm
- Ask the trustees to appoint a mathematician to explain the report to them
Explanation
Actuaries must communicate so the audience can understand and act on the advice. Plain-language summaries of position, assumptions and risks, backed by full documentation, achieve this. Giving only a ratio or hiding sensitivities leaves the trustees under-informed.
Did you get it right without looking?
One question tells you little. A timed set on Skills and knowledge for working as an actuary in financial services shows your real accuracy, how long you take and where you lose marks.
More Skills and knowledge for working as an actuary in financial services questions
- During a meeting at a Bengaluru insurer, an actuary notices the marketing head nodding while folding his arms and avoiding eye contact as a …
- A pension consultant in Chennai is developing the solution for a corporate gratuity fund. Which activity belongs in the developing the solut…
- Priya, an actuary at a Pune general insurer, has produced reserving results with wide uncertainty. The claims director wants a single figure…
- A health insurer in Hyderabad wants to price a new critical illness product. The actuary has only five years of the insurer's own limited cl…
- Rahul, an actuary, is asked to take on a pricing assignment for a general insurer in a specialised area where he has no experience. The insu…
- Rahul, an actuary at an Indian insurer, is leading a project with a regulatory deadline. A senior underwriter, Meera, resists sharing data b…