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actuarial standard of practice

Purpose—This actuarial standard of practice (ASOP) provides guidance to actuaries when performing professional services with respect to risk treatment within a risk management system, including designing, implementing, using, maintaining, and reviewing those systems. 1.2 Scope—This standard applies to actuaries when performing professional services with respect to risk treatment for the purposes of enterprise risk management (ERM). Risk treatment is often performed as part of an ERM control cycle. Within a typical ERM control cycle, risks are identified, risks are evaluated, risk appetites are chosen, risk limits are set, risks are accepted or avoided, risk mitigation activities are performed, and actions are taken when risk limits are breached. Risks are monitored and reported as they are taken and as long as they remain an exposure to the organization. This standard focuses on four aspects of risk treatment: determining risk tolerance, choosing risk appetites, setting risk limits, and performing risk mitigation activities. Guidance for activities related to risk evaluation is addressed in ASOP No. 46, Risk Evaluation in Enterprise Risk Management. This standard does not apply to actuaries when performing professional services with respect to risk treatment that are not for the purposes of ERM. Examples of risk treatment services that may be performed for purposes other than ERM include designing a health insurance program and executing a product-specific reinsurance or hedging program. If the actuary departs from the guidance set forth in this standard in order to comply with applicable law (statutes, regulations, and other legally binding authority), 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 consider the guidance in this standard to the extent it is applicable and appropriate.