IAI Actuarial Core Principles · Business Management · Professionalism and ethics case studies
Priya is the appointed actuary of Insurer X and is also a non-executive director's spouse at a firm that supplies reinsurance to X, a fact known only to her. She is about to sign off on a report that recommends a large increase in reinsurance cover. Her recommendation is technically sound. Which course best satisfies professional standards?
Priya should disclose the relationship to the insurer's board before the report is relied upon so it can decide how to manage the conflict, perhaps through independent review. Technical soundness does not remove an apparent conflict, and concealing it undermines trust in her objectivity.
- ASign the report; the recommendation is sound so the relationship is irrelevant
- BSign the report but remove any mention of reinsurance suppliers
- CDisclose the relationship to the insurer's board before the report is relied upon, and let it decide how to manage the conflict, which may include independent reviewCorrect
- DResign from the profession because any relationship is prohibited
- Disclose the relationship only to the supplier, not to Insurer X
Explanation
A perceived conflict matters even if advice is sound, because users may question objectivity. Timely disclosure to the party relying on the advice, with possible independent review, is the proper approach. Silence or disclosure to the wrong party fails transparency.
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