The actuary assists the social security scheme in complying with the relevant accounting standards. The actuary uses the relevant methodology and assumptions when carrying out calculations to be used for accounting purposes.
The actuary follows the relevant actuarial standards applicable in the country in which he or she works or those set by the actuarial association(s) of which he or she is a member. If the actuary is a member of an actuarial association which has not set relevant standards, the social security institution ensures that the actuary follows the International Standards of Actuarial Practice (ISAP) recommended by the International Actuarial Association (IAA) as model standards.
The actuary and social security institution comply with national regulatory requirements established by the state and/or supervisory authorities. These regulations have an impact on a number of different areas of the social security institution such as management, financing and delivery of benefits. The social security institution with the assistance of the actuary assesses if the national laws and regulations of a country comply with ratified ILO Conventions and informs the national government of any divergence from the ILO Conventions.
The actuary should comply with national regulatory requirements, national and international actuarial standards, and national and, where applicable, international relevant professional guidance. Social security institutions should ensure that there is support for the actuary in this respect. Other professionals involved in actuarial work should also ensure compliance with relevant professional standards and guidance.
Actuaries are solicited in the assessment of some or all of the operational risks faced by social security institutions due to their knowledge of various elements of the management of a system. The internal actuarial department also conducts its own risk assessment which will feed into the overall risk assessment of the organization.
The social security institution seeks actuarial input into the management of risks faced by social security schemes.
This guideline identifies some of the risks related to social security schemes, sets out the mechanisms to consider in addressing them through their identification, measurement and treatment using the risk management process set out in Guidelines 30, 31 and 32, and describes actuarial input into this process.
Once risk has been identified and measured, the social security institution makes appropriate decisions regarding the mitigation and treatment of risk.
The social security institution sets out appropriate processes and structures to measure risk.
The measurement of risk consists of assessing the frequency and severity of the risks identified as well as the likely distribution of outcomes. The frequency of a risk is the probability the event will occur; the severity is the financial implication; while the distribution refers to how widely outcomes are likely to vary from the mean expected event.
The social security institution sets out appropriate processes and structures to identify risk.
The social security institution establishes a risk function that oversees the management of risk and reports to the board, if any, and/or management. This function, and the processes carried out or overseen by it, require actuarial input. The risk function coordinates with other functions to ensure effective risk management.
