Proposed Revision of ASOP No. 41 – Actuarial Communications (Second Exposure Draft)

Actuarial Communications

Second Exposure Draft

TO: Members of Actuarial Organizations Governed by the Standards of Practice of the Actuarial Standards Board and Other Persons Interested in Actuarial Communications

FROM: Actuarial Standards Board (ASB)

SUBJ: Proposed Revision of Actuarial Standard of Practice (ASOP) No. 41

This document contains the second exposure draft of a proposed revision of ASOP No. 41, Actuarial Communications. Please review this exposure draft and give the ASB the benefit of your comments and suggestions. Each written comment letter received by the comment deadline will receive appropriate consideration by the drafting committee and the ASB.

The ASB appreciates comments and suggestions on all areas of this proposed standard.  The ASB requests comments be provided using the Comments Template that can be found here and submitted electronically to comments@actuary.org. Include the phrase “ASOP No. 41 COMMENTS” in the subject line of your message. Also, please indicate in the template whether your comments are being submitted on your own behalf or on behalf of a company or organization.

The ASB posts all signed comments received on its website to encourage transparency and dialogue. Comments received after the deadline may not be considered. Anonymous comments will not be considered by the ASB nor posted on the website. Comments will be posted in the order that they are received. The ASB disclaims any responsibility for the content of the comments, which are solely the responsibility of those who submit them.

For more information on the exposure process, please see the ASB Procedures Manual.

Deadline for receipt of comments: February 15, 2025

History of the Standard

The current version of ASOP No. 41, adopted in December 2010, superseded the version of ASOP No. 41 that was adopted in March 2002. The 2002 version was based on Interpretative Opinion No. 3, Professional Communications of Actuaries, which had been adopted by the Academy in 1981. With the passage of time, and the development and evolution of ASOPs, the ASB believed it would be beneficial to update and clarify ASOP No. 41.

ASOP No. 41 applies to all credentialed actuaries practicing in the U.S. in all areas of practice.

Consistent with the Code of Professional Conduct, this standard defines “actuarial communication” as “A written, electronic, or oral communication issued by an Actuary with respect to Actuarial Services.”

First Exposure Draft

The first exposure draft was released in June 2022 with a comment deadline of November 1, 2022. Thirty-eight comment letters were received and considered in making changes that are reflected in the second exposure draft.

Notable Changes from the First Exposure Draft

Notable changes from the first exposure draft included in this second exposure draft are summarized below. Notable changes do not include changes made to improve readability, clarity, or consistency.

1. Section 2.2, Actuarial Conclusions, was added.
2. Section 2.3, Actuarial Report, was revised.
3. The definition for “actuarial finding” was removed.
4. The definition of “oral communications” as well as any additional guidance on oral communications was removed.
5. Section 2.7, Prescribed Assumption or Method Set by Law, was added.
6. Section 2.9, Subsequent Events, was added.
7. The guidance for “actuarial communication” in section 3 was refined.
8. Guidance regarding the risk of misuse of actuarial communications was added in section 3.3.
9. Guidance regarding when to issue an actuarial report was added in section 3.6.
10. Guidance regarding disclosures was moved from section 3 to section 4.
11. Guidance regarding instances in which disclosures in an actuarial report may not be required was added in section 4.
12. Guidance related to actuarial documentation was removed.

In addition, sections 3 and 4 were revised to eliminate potentially duplicative guidance and streamline the ASOP.

Notable Changes from the Existing ASOP

Notable changes from the existing standard are summarized below. Notable changes do not include changes made to improve readability, clarity, or consistency.

1. Definitions in section 2 were improved to better specify the differences between actuarial communications and actuarial reports.
2. Section 2.2, Actuarial Conclusions, was added.
3. Section 2.3, Actuarial Report, was revised.
4. The definition for “actuarial finding” was removed.
5. The definition of “oral communications” as well as any additional guidance on oral communications was removed.
6. Section 2.7, Prescribed Assumption or Method Set by Law, was added.
7. Section 2.9, Subsequent Events, was added.
8. Sections 3 and 4 were modified regarding the requirements that apply to all actuarial communications versus those that apply only to actuarial reports.
9. The guidance for “actuarial communication” in section 3 was refined.
10. Guidance regarding the risk of misuse of actuarial communications was added in section 3.3.
11. Guidance regarding when to use an actuarial report was added in section 3.6.
12. Guidance regarding disclosures was moved from section 3 to section 4, and consistency between section 3 and 4 was improved.
13. Guidance related to actuarial documentation was removed.
14. Guidance was expanded in section 4.1 regarding constraints or circumstances that might reduce the required disclosures in an actuarial report, or the need for an actuarial report, including situations in which an actuary is working as part of a larger team.
15. Guidance in section 4.1 regarding reliance on others was expanded.

Request for Comments

The ASB appreciates comments and suggestions on all areas of this proposed standard submitted through the Comments Template. Rationale and recommended wording for any suggested changes would be helpful. In addition, the ASB would like to draw the readers’ attention to the following questions:

1. Is it clear when an actuary should issue an actuarial report? If not, what further clarifications would you recommend?
2. Is it clear which guidance applies for all actuarial communications and which guidance is required only for actuarial reports? If not, what further clarifications would you recommend?

The ASB voted in October 2024 to approve this exposure draft.

 

ASOP No. 41 Task Force
Patricia Matson, Chairperson
Gordon C. Enderle	Barbara L. Snyder
Audrey L. Halvorson	Frank Todisco
Rebecca A. Sheppard	Shari A. Westerfield
Lisa A. Slotznick

 

Actuarial Standards Board
Kevin M. Dyke, Chairperson
Laura A. Hanson	Gabriel R. Schiminovich
Richard A. Lassow	Judy K. Stromback
David E. Neve	Alisa L. Swann
Christopher F. Noble	Patrick B. Woods

 

The Actuarial Standards Board (ASB) sets standards for appropriate actuarial practice in the United States through the development and promulgation of Actuarial Standards of Practice (ASOPs). These ASOPs describe the procedures an actuary should follow when performing actuarial services and identify what the actuary should disclose when communicating the results of those services.

 

PROPOSED REVISION OF
ACTUARIAL STANDARD OF PRACTICE NO. 41

ACTUARIAL COMMUNICATIONS

STANDARD OF PRACTICE

Section 1: Purpose, Scope, Cross References, and Effective Date

1.1 Purpose

This actuarial standard of practice (ASOP or standard) provides guidance to actuaries when issuing actuarial communications in any form (written, electronic, or oral).

1.2 Scope

This standard applies to actuaries when issuing actuarial communications in any form (written, electronic, or oral) within any practice area. This standard does not apply to actuaries when issuing a communication that does not include the rendering of actuarial services.

The actuary should also refer to the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States (U.S. Qualification Standards) and the Code of Professional Conduct as they relate to actuarial communications.

Applicable law (statutes, regulations, and other legally binding authority) may prescribe the form and content of a particular actuarial communication. In such situations, the actuary should comply with this standard to the extent not prohibited by applicable law.

If a conflict exists between this standard and applicable law, the actuary must comply with applicable law. If the actuary departs from the guidance set forth in this standard in order to comply with applicable law, or for any other reason the actuary deems appropriate, the actuary should refer to section 4.

1.3 Cross References

When this standard refers to the provisions of other documents, the reference includes the referenced documents as they may be amended or restated in the future, and any successor to them, by whatever name called. If any amended or restated document differs materially from the originally referenced document, the actuary should follow the guidance in this standard to the extent it is applicable and appropriate.

1.4 Effective Date

This standard is effective for actuarial communications issued on or after four months after adoption by the Actuarial Standards Board.

Section 2: Definitions

The terms below are defined for use in this standard and appear in bold throughout the ASOP. The actuary should also refer to ASOP No. 1, Introductory Actuarial Standard of Practice, for definitions and discussions of common terms, which do not appear in bold in this standard.

2.1 Actuarial Communication

A written, electronic, or oral communication issued by an actuary with respect to actuarial services. An electronic communication is a written or oral communication issued by means of a computer or other electronic device.

2.2 Actuarial Conclusions

Conclusions that have been formed based on actuarial analysis of data or other information. Examples of such actuarial analysis include ratemaking, pricing, experience studies, reserving, valuation, cost estimates, financial audits/exams, asset/liability management, assumption setting, risk assessments, appraisals, and the review of such analysis.

2.3 Actuarial Report

An actuarial communication that the actuary issues in writing or another permanent form to support actuarial conclusions.

2.4 Actuarial Services

Professional services provided to a principal by an individual acting in the capacity of an actuary. Such services include the rendering of advice, recommendations, findings, or opinions based upon actuarial considerations.

2.5 Intended User

Any person or entity who the actuary identifies as able to rely on an actuarial communication. Intended users may be internal or external to the actuary’s principal.

2.6 Information Date

The date(s) through which data or other information has been considered in developing actuarial conclusions.

2.7 Prescribed Assumption or Method Set by Law

A specific assumption or method that is mandated or that is selected from a specified range or group of assumptions or methods that is deemed to be acceptable by applicable law (statutes, regulations, and other legally binding authority). For this purpose, an assumption or method selected by a governmental entity for a financial security program that such governmental entity or a political subdivision of that entity directly or indirectly sponsors as an employer is not a prescribed assumption or method set by law.

2.8 Principal

A client or employer of the actuary.

2.9 Subsequent Events

Events that (1) occur after the information date; (2) become known to the actuary before the actuarial report is issued; and (3) may have a material effect on actuarial conclusions.

Section 3: Analysis of Issues and Recommended Practices

3.1 Clarity, Form, and Content

When issuing an actuarial communication, the actuary should take appropriate steps to ensure that it is clear and appropriate to the circumstances and its intended users and satisfies applicable ASOPs. When an actuarial communication is not recorded, the actuary should consider following up with a recorded communication.

3.2 Timing

The actuary should issue the actuarial communication within a reasonable time period, taking into account the needs of the principal, the needs of the intended users, and the complexity of the assignment.

3.3 Risk of Misuse

An actuarial communication may be used by another party in a way that may influence the actions of a third party. The actuary should recognize the risks of misquotation, misinterpretation, or other misuse of the actuarial communication and should therefore take reasonable steps to present the actuarial communication clearly and fairly and to include, as appropriate, limitations on the distribution and utilization of the actuarial communication. The actuary may include language in the actuarial communication that limits its distribution to other users (for example, by stating that it may only be provided to such parties in its entirety or only with the actuary’s consent).

3.4 Uncertainty or Risk

When issuing an actuarial communication, the actuary should include information regarding possible uncertainty or risk, as appropriate to the particular circumstances and the needs of the intended users.

3.5 Responsibility of the Actuary

When issuing an actuarial communication, the actuary should clearly identify the actuary as being responsible for it. When two or more individuals jointly issue an actuarial communication, the communication should identify all actuaries responsible for it. The name of an organization with which each actuary is affiliated may be included in the communication, but the actuary’s responsibilities are not affected by such identification. The actuary should also indicate the extent to which the actuary or other sources are available to provide supplementary information and explanation unless, in the actuary’s professional judgment, the intended users will otherwise be adequately informed about such availability.

3.6 Actuarial Report

When issuing an actuarial communication that includes actuarial conclusions, the actuary should issue an actuarial report or confirm that an actuarial report has been or will be issued. Unless otherwise disclosed, the actuary or actuaries issuing the actuarial report will be assumed to have taken responsibility for all actuarial conclusions, material assumptions, and methods.

Section 4: Communications and Disclosures

4.1 Required Disclosures in an Actuarial Report

When issuing an actuarial report, the actuary should include the following disclosures:

1. identification of the responsible actuary or actuaries;
2. the acknowledgement of the responsible actuary’s or actuaries’ qualifications as specified in the U.S. Qualification Standards;
3. the scope and intended purpose of the assignment;
4. the intended users and, as appropriate, the principal(s);
5. the information date;
6. the actuarial conclusions;
7. any limitations or constraints on the use or applicability of the actuarial conclusions;
8. a statement about possible uncertainty or risk associated with the actuarial conclusions;
9. a description of the methods, procedures, assumptions, models, and data used by the actuary with sufficient clarity that another actuary qualified in the same practice area could make an objective appraisal of the reasonableness of the actuary’s work;
10. identification of subsequent events and their potential implications, if it is impractical or inappropriate to revise the actuarial conclusions before issuing the actuarial report;
11. the disclosures required in ASOP No. 23, Data Quality, when relying on another party and thereby disclaiming responsibility for data or other information related to data;
12. the disclosures required in ASOP No. 56, Modeling, when relying on another party and thereby disclaiming responsibility for models;
13. when using a prescribed assumption or method set by law,
    1. a reference to the applicable law under which the report was prepared;
    2. the assumption or method that is prescribed by the applicable law; and
    3. a statement that the report was prepared in accordance with the applicable law.

These disclosures should be made regardless of whether the actuary believes the assumption or method is reasonable for the purpose of the actuarial report.

14. when relying on another party and thereby disclaiming responsibility for material assumptions and methods set by another party,
    1. the assumption or method that was set by another party;
    2. the party who set the assumption or method;
    3. the reason that this party, rather than the actuary, set the assumption or method;
    4. the extent to which the actuary has reviewed the assumption or method for reasonableness and consistency with the scope of the actuary’s assignment; and
    5. one of the following:
       1. a statement that the actuary has reviewed the assumption or method and finds that it is reasonable and consistent with the scope of the actuary’s assignment;
       2. a statement that the assumption or method does not significantly conflict with what, in the actuary’s professional judgment, would be reasonable for the purpose of the assignment;
       3. a statement that the assumption or method significantly conflicts with what, in the actuary’s professional judgment, would be reasonable for the purpose of the assignment, how it conflicts, why it is still used, and a statement regarding the ability of the intended users to rely on the results in the report due to the conflicting assumption or method; or
       4. a statement that the actuary was unable to judge the reasonableness of the assumption or method, why the actuary was unable to judge the reasonableness, and a statement regarding the ability of the intended users to rely on the results in the report due to the actuary’s inability to judge the reasonableness of the assumption or method.
15. if the actuarial report invalidates actuarial conclusions from the actuary’s prior actuarial report on the same assignment, a statement that the actuarial conclusions provided in the actuary’s prior actuarial report are no longer valid and an explanation of why they have changed; and
16. the disclosures required in other ASOPs that apply to the actuary’s assignment.

The actuary may include these disclosures by reference to other documents or recorded communications that are available to the intended users.

The actuary may choose to omit some of the disclosures in (a)-(p) above when, in the actuary’s professional judgment, the intended users will be adequately informed about the basis for the actuarial conclusions. Examples of such circumstances may include when the actuarial conclusions are part of a larger project within a single organization or are provided to intended users who have access to the supporting information. However, omitting disclosures may not be appropriate if the actuarial conclusions will receive broad distribution. The actuary should be prepared to justify any omission.

4.2 Deviation from the Guidance of an ASOP

If the actuary deviates materially from the guidance set forth in an applicable ASOP for any reason, the actuary can still comply with that ASOP by providing an appropriate statement in the actuarial communication with respect to the nature, rationale, and effect of such deviation.

4.3 Confidential Information

Nothing in this ASOP is intended to require the actuary to disclose confidential information.

Appendix

Comments on the First Exposure Draft and Responses

The first exposure draft of the proposed revision of ASOP No. 41, Actuarial Communications, was issued in June 2022 with a comment deadline of November 1, 2022. Thirty-eight comment letters were received, some of which were submitted on behalf of multiple commentators, such as by firms or committees. For purposes of this appendix, the term “commentator” may refer to more than one person associated with a particular comment letter. The ASOP No. 41 Task Force of the Actuarial Standards Board (ASB) carefully considered all comments received, and the ASB reviewed (and modified, where appropriate) the changes proposed by the task force.

Summarized here are the significant issues and questions contained in the comment letters and the responses. Minor wording or punctuation changes that were suggested but not significant are not reflected in the appendix, although they may have been adopted.

The term “reviewers” in appendix 2 includes the ASOP No. 41 Task Force and the ASB. The section numbers and titles used in appendix 2 refer to those in the first exposure draft, which are then cross referenced with those in the new exposure draft.