The International Actuarial Association (IAA) adopted its second International Standard of Actuarial Practice, ISAP 2, on the Financial Analysis of Social Security Programs (SSPs), at its Council meeting held in Singapore on the 13th of October 2013.
An ISAP is a model for actuarial standard-setting bodies to consider. The IAA encourages actuarial standard-setting bodies to study the ISAP and to consider taking one of the following courses of action, if it has been determined that this ISAP is relevant for actuaries in their jurisdiction:
• Adopting this ISAP as a standard with appropriate modification;
• Endorsing this ISAP as a standard as an alternative to existing standards;
• Modifying existing standards to obtain substantial consistency with this ISAP; or
• Confirming that their existing standards are already substantially consistent with this ISAP.
This model standard was proposed by the Actuarial Standards Committee (ASC) of the IAA in compliance with the IAA’s due process for International Standards of Actuarial Practice. As the finalized standard was developed, the ASC took into consideration the numerous comments received on the exposure draft published in October 2012, resulting in several improvements.
Given their significant expertise in preparing long-term financial projections (which by their very nature are uncertain), actuaries play an important role in carrying out financial analyses of SSPs. Due to the reliance placed on actuarial projections in public policy decision-making, it is important that analyses of SSPs are prepared in an objective and transparent manner.
Few existing professional standards and guidelines specifically apply to SSPs. Most countries have no standards in this area. This proposed ISAP has received informal encouragement from the International Social Security Association (ISSA) and the International Labour Organization (ILO).
The intention of a standard of actuarial practice is to promote a greater consistency of applied approaches to actuarial practice in a given situation, so as to increase the confidence of clients and the public in the actuarial work product, but without unnecessarily constraining the exercise of actuarial judgment.
ISAP 2 is available on the IAA website (www.actuaries.org) under publications and can also be accessed by clicking on the link provided under ‘Hot Topics’ on the homepage.
This new model standard directly supports the IAA’s strategic objective to promote the development and issuance of actuarial standards in the jurisdictions of all Full Member Associations, and the global convergence of actuarial standards.