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IAI Actuarial Core Principles · Business Management · Professionalism and ethics case studies

Rohan, an appointed actuary at an Indian life insurer, is asked by the CFO to also advise a large reinsurer on pricing a treaty that covers the same insurer's book. Rohan realises that the reinsurer's interests may diverge from those of his employer. What is the most appropriate first step under the Actuaries' Code?

Rohan should identify the conflict, disclose it openly to both the insurer and the reinsurer, and proceed only if it can be managed with their informed consent. If it cannot be managed, he should decline. Concealment or merely charging more does not address the conflict.

  1. AAccept the work but charge a higher fee to reflect the added risk
  2. BIdentify the conflict, disclose it to both parties, and proceed only if it can be managed with their informed consent or decline the workCorrect
  3. CAccept the work and keep the arrangement secret from the employer to protect the reinsurer
  4. DDecline the work without explaining the reason to anyone
  5. Accept the work and rely on the reinsurer's own advisers to spot any problem

Explanation

A conflict of interest must be identified and disclosed to the affected parties, and the actuary should continue only where it can be managed with informed consent, otherwise decline. Hiding the conflict breaches integrity and transparency. A higher fee or reliance on others does not remove the conflict.

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