Actuarial Notes

Appointed Actuary Responsibilities

Study guides: Exam 6U, Exam GI-302

Appointed Actuary Responsibilities are the statutory duties that the NAIC Property and Casualty Annual Statement Instructions — given force by each state's annual statement requirements — place on a U.S. insurer's Appointed Actuary, the Qualified Actuary appointed by the board of directors to opine on the company's loss and loss adjustment expense reserves: to be properly appointed and qualified, to deliver the Statement of Actuarial Opinion, the Actuarial Opinion Summary and the Actuarial Report, to report to the board, and to correct an opinion found to be in error.

\begin{aligned} \text{Appointment} &: \text{by Dec 31 of the opinion year} \\ \text{Opinion} &: \text{with the Annual Statement, Mar 1} \\ \text{AOS} &: \text{to the domiciliary state, Mar 15} \\ \text{Report} &: \text{available by May 1} \end{aligned}

  • Appointment. On first engagement the board — or its equivalent, or a committee reporting directly to it — appoints the actuary by December 31 of the year the opinion covers. Within 5 business days the company tells the domiciliary commissioner who was appointed, by whom and when, and that the actuary is a Qualified Actuary (or commissioner-approved) whose qualification documentation went to the board.
  • Qualification. A Qualified Actuary (i) meets the USQS Specific Qualification Standard for P&C opinions set by the American Academy of Actuaries — basic education, three years of responsible experience and continuing education; (ii) holds an Accepted Actuarial Designation: an FCAS whose education includes Exam 6 (United States), an ACAS with Exam 6 (US) and Exam 7, or an FSA with the SOA's specified general insurance exams, with substitutions for older syllabi; and (iii) belongs to an organization that requires adherence to the Academy's Code and the USQS and participates in the ABCD. The board receives and documents a qualification description; the actuary attests to CE each year through the CAS or SOA.
  • Three deliverables, three audiences:
    • the Statement of Actuarial Opinion — public, attached to page 1 of the NAIC Annual Statement, in four prescribed sections with Exhibits A and B (see SAO Language);
    • the Actuarial Opinion Summary — confidential, to the domiciliary state: the actuary's point estimate and/or range against the carried reserves;
    • the Actuarial Report — confidential documentation, available by May 1 or within two weeks of a commissioner's request, kept with the workpapers for seven years.
  • Risk of material adverse deviation (RMAD). The actuary must choose a materiality standard, state its basis and dollar amount, and say explicitly whether significant risks and uncertainties could result in material adverse deviation, naming company-specific factors rather than boilerplate. Under ASOP No. 36 such risk exists when the carried reserve plus the materiality standard still lies within the actuary's range of reasonable estimates.
  • Continuing duties. The actuary reports to the board each year on the items in scope, and the minutes record how. If the board replaces the prior actuary, the company must report any disagreements with them in the preceding 24 months (see the second example). If the actuary later finds the opinion was wrong because data (not assumptions) was factually incorrect at the balance sheet date, they notify the board or audit committee in writing within 5 business days, and an amended opinion goes to the commissioner. Later events, or results that simply differ from projections, do not make an opinion "in error".
  • Canadian counterpart: the Appointed Actuary under the Insurance Companies Act — a wider role that also reports on financial condition.

Can This Actuary Be Appointed? A U.S. insurer is choosing an Appointed Actuary for its 2025 opinion. Which candidates are Qualified Actuaries?

  1. An FCAS (2016) who passed CAS Exam 6 (US), with eight years of reserving experience reviewed by a signing actuary.

  2. An ACAS (2018) who passed Exam 6 (US) but never sat Exam 7, with six years of reserving experience.

  3. An FCAS (2023) who sat Exam 6 (Canada) instead of Exam 6 (US), with seven years of reserving experience.

  4. An FCAS (2025) with Exam 6 (US) and eighteen months of reserving experience.

Answer

  1. Yes, provided her CE is current — CAS membership supplies the Code, USQS and ABCD link.
  2. Possibly. An ACAS also needs Exam 7, but an ACAS earned before 2021 may substitute experience and/or continuing education, provided the qualification documentation explains how the Exam 7 reserving knowledge was obtained.
  3. Not by designation. The FCAS condition is Exam 6 (US), and the experience substitution is only for designations earned before 2021. The remaining routes are evaluation by the Academy's Casualty Practice Council or approval by the domiciliary commissioner — with the approval letter attached to each year's opinion.
  4. Not yet. The designation is accepted, but the USQS require three years of responsible experience reviewed by a qualified actuary. A credential alone never makes a Qualified Actuary.

Replacing the Appointed Actuary In October the board replaces the actuary who signed last year's opinion. Fourteen months earlier they had disagreed over whether to report a significant risk of material adverse deviation; management eventually accepted the actuary's view. What must happen, and when?

Answer

  • Within 5 business days of the board's action, the company notifies the domiciliary insurance department.
  • Within 10 business days of that notice, it sends a separate letter describing each disagreement in the preceding 24 months over RMAD, disclosures, scope, procedures, opinion type, wording or data quality. The RMAD dispute must be included although it was resolved in the actuary's favour — the rule covers resolved and unresolved disagreements alike. In the same window it asks the former actuary to respond.
  • Within 10 business days of that request, the former actuary states whether they agree, and the company forwards the reply with its own response.
  • By December 31 the board appoints a successor, notified within 5 business days. If the successor does not review the predecessor's work, the opinion and the Actuarial Report must say so.

The letter means an actuary replaced for refusing to soften an opinion cannot be removed quietly.