This paper shows how the powerful and flexible tool of stochastic modelling can be applied to a range of business decisions extending far beyond the asset allocation solutions that are common to many asset/liability modelling studies. The example used to demonstrate these techniques is a general insurance case study, but similar principles can be extended to many different business situations. At each stage of the analysis we consider the implications of modern financial theory on the management decision process together with a practical perspective on observed behaviour in the real world. Opportunities are taken to suggest directions in which further research may be of benefit to the actuarial profession.

Actuaries should seek to understand the phenomenon of ‘professions’ because much of our working life is influenced by the belief that we are a ‘profession’. This paper considers various theories as to why professions exist — do they arise naturally to fulfil functions in society, or are they created by the efforts of the occupational groups which aspire to become professions? Professions are shaped by the society of which they are a part. Ongoing changes in society are affecting professions in general, and the actuarial profession in particular. The difficulties which the actuarial profession will face as it seeks to expand beyond its traditional territory are discussed. Finally the author speculates on what institutional forms might replace professions in the twenty-first century.

This is a discussion paper prepared by the Compliance/Peer Review Working Party of the Professional Affairs Board. It considers the monitoring of compliance with the professional conduct standard and guidance notes, how this is being done, and whether changes need to be made to the monitoring in the light of on-going changes to the regulation of financial services.