IAI Actuarial Core Principles · Business Management · Professionalism and ethics case studies
Rohan, an actuary, is asked by a general insurer's CFO to remove a paragraph from a reserving report. The paragraph says the reserves may be inadequate under plausible adverse claim inflation. The CFO says the report will go to the board and then to the regulator. What is the most appropriate response?
Rohan should retain the material caveat and explain to the CFO why it must stay. Professional reporting must not mislead users, and adverse but plausible outcomes that affect reserve adequacy are material, so removing, diluting or selectively sharing the paragraph would breach the Actuaries' Code.
- ARemove the paragraph, because the client decides the content of the report
- BKeep the paragraph in the board copy but delete it from the version sent to the regulator
- CRetain the material caveat, explain to the CFO why it is needed, and not let the report mislead its usersCorrect
- DReplace the paragraph with a vague statement that reserves are subject to normal uncertainty
- Withdraw from the work without telling anyone and keep the matter private
Explanation
An actuary must not allow a report to mislead and must disclose material limitations and risks. Removing the caveat or diluting it would mislead the board and regulator. Preparing different versions for different readers is also improper. The right step is to keep it and discuss the reasons with the CFO.
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