Precept 3 of the Code of Professional Conduct requires actuaries to ensure that the actuarial services they perform satisfy applicable standards of practice. Annotation 3-1 goes on to require actuaries to “observe applicable standards of practice that have been promulgated by a Recognized Actuarial Organization for the jurisdictions in which the Actuary renders Actuarial Services.”
Most of the time, actuaries know which standards of practice apply to their work. For actuarial work products intended to be used in the U.S., the actuarial standards of practice (ASOPs) promulgated by the Actuarial Standards Board (ASB) apply. But in some cases, the actuary may be uncertain. When deciding which standards are applicable, the actuary must consider two things: the jurisdiction and the assignment itself.
Let’s take a look at “jurisdiction” first. The jurisdiction where you render actuarial services is not necessarily your physical location. It is where your work product is intended to be used. As described in the Academy’s paper on international practice, the jurisdiction of the work product may be determined by a variety of factors, such as:
- The domicile of the actuary’s principal (i.e., client or employer);
- The domicile(s) of the intended user(s) of the work product (e.g., the principal or regulators);
- The expectations of the intended user(s); S The location where the work was intended to be used;
- The jurisdiction whose laws and standards the actuary referred to in completing the work product; and
- The stated purpose of the work product.
In some cases, standards from more than one jurisdiction may apply. In such cases, or where the jurisdiction isn’t clear, you should strive to follow the standards of all of the relevant jurisdictions, typically by following the standard that is strictest.
Once you have determined which jurisdiction’s standards are most applicable, you must then determine whether those standards are applicable to the task at hand. If the jurisdiction in which you are providing actuarial services does not have standards of practice or does not have standards that apply to the work you are doing, then professional judgment is required. Annotation 3-2 addresses this very situation:
Where a question arises with regard to the applicability of a standard of practice, or where no applicable standard exists, an Actuary shall utilize professional judgment, taking into account generally accepted actuarial principles and practices.
As described in the Academy’s paper on international practice, the jurisdiction of the work product may be determined by a variety of factors.
When providing actuarial work products to be used in foreign jurisdictions that lack standards applicable to the assignment, it is a good idea to consult the local actuarial organization and review local practice. In some cases, standards from another jurisdiction may be used or adapted. In such cases, it is a good idea to disclose the standard used, any adaptations made, and the rationale for both.
It is important to remember that Annotation 3-2 is also relevant in situations where U.S. practice is emerging and has yet to be covered by the ASB’s standards of practice. Even if you are working in an emerging area, certain ASB standards will apply. ASOP No. 1, Introductory Standard; No. 23, Data Quality; and No. 41, Actuarial Communications, always apply for actuarial work intended to be used in the U.S. After considering the guidance in those ASOPs, you will need to use professional judgment.
Whenever you provide actuarial services in a jurisdiction or for an assignment where no standards appear to apply, it may be helpful to consult the Actuarial Board for Counseling and Discipline or the actuarial association of the jurisdiction in question. In all cases, it would be wise to disclose which standards you chose to use and the rationale for your decision.