Actuarial Profession after the Morris Review Caroline Instance January 2006.
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Transcript of Actuarial Profession after the Morris Review Caroline Instance January 2006.
Actuarial Profession after the Morris Review
Caroline Instance
January 2006
Governance of Actuarial Profession
Complex: two Councils, Meet as individually and as two Councils Delegate to FIMC
Chief Executive heads up executive structure and sits on FIMC. 102 staff over three sites Involved in operational delivery, policy making
and “public face”.
Penrose Report
Criticisms of actuaries were: Lack of comprehensive standards
(particularly in defining policyholders reasonable expectations)
Over reliance on role of Appointed Actuary Lack of scrutiny and audit of calculations Reactive discipline procedures Reluctance to challenge fellow professionals
Morris Review
Approach Positive, open engagement Confident in our own reforms Willingness to embrace further change Regular dialogue and supplying information Recognise change happening to all professions
(accountancy, medicine and law) Focus on future, not argue about past
Morris Review
Work was already in progress Plans to set up independent standard setting
body Compliance monitoring / peer review Revalidation of competence (enhanced CPD
requirements) New discipline procedure (completed) New education syllabus (completed)
Morris : Final Recommendations
Market for actuarial services Regulating the Profession Education & CPD Actuarial roles Standard setting Public interest and accountability Scrutiny and discipline
FRC responsibilities
Set up Board for Actuarial Standards for technical standards (in consultation with AP) New communication standard (first job)
Independent oversight of Profession’s role in: Setting ethical standards Running exams and CPD Monitoring compliance with standards Administering discipline procedures
Extend the remit of the AIDB to include ‘public interest’ cases involving individual actuaries
Morris : Final Recommendations
Actuarial Profession supported the implementation of the Morris recommendations and therefore agreed that it would pass its
technical standard setting role to BAS and be subject to general oversight by FRC
Knows it will have to “comply or explain” in relation to POBA reviews
FRC Revised Structure
Board
Board forActuarial
Standards
AccountingStandards
Board
AuditingPractices
BoardPOBA(A)
ReviewPanel
A(A)Investigation
andDiscipline
Board
Council
FRC Project
Treasury sponsored (committed to implementing Morris in total– their closure to Equitable/Penrose)
Voluntary at this stage – full legislative backing unlikely for 2 to 5 years Implication in short term is that the new
regime can only mirror current arrangements of the Profession
FRC Project
Legislation to provide indemnity for FRC as regulator to
cover extended role to underpin funding
Problem with Sewell motion (Scotland) No final decision on funding following
consultation
FRC Project
Morris has not provided a blueprint Input from Treasury, Actuarial Profession,
FSA and TPR FRC in driving seat
Programme Steering Board Programme Management Group
FRC set up website – RAP-communications intended to report on progress and “sell” changes to those who will pay for it
FRC Project
Implementation planned for 1 April 2006 AIDB part may be later
FRC (and BAS) will protect their independence
They have experience of standard setting and are following same model for BAS If BAS want volunteers for a working group
they will report to BAS not the Profession
FRC Project
FRC has now appointed: Chairman (Paul Seymour) Technical Director of BAS (Nigel Bankhead) and Head of Actuarial Oversight of POBA (Paul Kennedy).
Currently recruiting BAS Board members and a new Actuarial Board member for POBA.
FRC Project
Transition arrangements to be agreed will be post 1 April 2006
They understand that current GNs are a mix of different types of guidance
Might need: clarity over application to overseas members extracting non-technical material back to PCS
Next steps for Profession
Minor changes to charter and rules Consultation/ voting by membership on AIDB
proposals Work with BAS on transition Conclude Strategy Review
Reasons for change
World is changing Move from paternalism and solidarity to
individualism Globalisation of markets and firms Society expects something different from
Professions Growth in risk management Growth in computing and internet
Reasons for change
Morris’s crossroads
Retrenchment into narrow reserved roles, leading to decline and our eventual demise as a separate profession
Expanding the use of our skills into “a wider remit”, bringing us into increasing competition with others
The strategic objectives
Restoring confidence
Increasing market share of talent leaving University
Increasing value added by actuaries and thereby their influence
Leveraging global capabilities
How
Consulting and collecting evidence from
Customers
Employers
Universities and
Recruiters Member consultations
Meetings and email
Key findings
Growth in membership is healthy Decline in pensions and life assurance not yet
happened Slow spread into ‘wider fields’ but lost ground in
investment area Reserved roles, held by only 25% of active
membership, are not valued by younger members Actuaries valued by employers and customers but
need to understand the broader business context
Students out-number Fellows
Membership split by qualification
Note: Excludes retired and unemployed actuariesSource: Membership database as at June 2005
6,2957,183
0
2,000
4,000
6,000
8,000
Members
Fellow s (47%) Non Fellow s (53%)
73% membership is under 40
0
100
200
300
400
500
600
700
19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65+
Fellow s Students and other members
UK 981
India 224
Kenya 75
Malaysia 49
China 134
Pakistan 25
Ireland 109
Australia/New Zealand 16
Other full o/seas rate 39
OtherEU, 46Singapore 29
South Africa 181
US 8
Other reduced o/seas rate 138Zimbabwe 32
More students from overseas
Full home rate
Reduced O/S rate
Full O/S rate
• Potential damage to finances if reduced O/S rate growth continues
Mis-match membership/Profession
Compliance Consulting
App
licab
le to
spec
ialis
t sec
tors
Uni
vers
al
appl
icat
ion
App
licab
le to
spec
ialis
t sec
tors
Uni
vers
al
appl
icat
ion
Regulation
Practice areas
Learned Society and Promotion
Appointed Actuary team
Pricing
General management
Client adviser – Pensions Other
Risk Management
Systems
Strategy
Compliance Consulting
Compliance
Scheme administrator
Project appraisal
Financial planning
Investment
Demand
Confidence in actuaries from customers but criticisms around: insufficient real world understanding lack of business judgement patchy and sometimes inadequate communication skills
tendency to act as judge and jury
Healthy demand from employers, but they want: much more business understanding far stronger communication skills better ability to work in multi-disciplinary teams
Supply
Profession not known to graduates other than those who did maths
Employers control recruitment
Employers want non-mathematicians and better interpersonal skills
Loyalty to firm taken over from Profession
Younger members feel disenfranchised by Professional body
Three strategic scenarios
Co-Regulator
Strategy
Builds on the reserved roles and
compliance activities of the Profession to ensure competence
and integrity of actuaries in the UK
financial sector
UK Careers Strategy
Builds on developing members with a
range of skills and knowledge focused
on quantitative risk to meet the evolving needs of the UK financial sector
Global Player Strategy
Builds on our current global presence to
develop a world-wide community of UK trained actuaries
Consultation questions
Grow reserved roles? Continue to cross subsidise compliance
activities of the Profession by membership subscriptions?
Broaden membership beyond traditional areas (pensions and insurance)?
Consultation questions
Post graduate University-only provision of core technical subjects?
2 tier qualification? Associate Fellow
Should Profession produce more rounded actuaries, and how?
Consultation question
To what extent should we try to expand overseas membership?
What steps should be taken to improve the engagement of younger members with the Professional body, ie to capture better their hearts and minds?
Councils’ and Members’ views
Question in favour againstGrow reserved roles? √Subs. subsidise compliance? √Broaden? √University-only bases CT exams? √2 tier qualification? √Rounded actuaries? √Expand overseas? √
Next steps
Councils deciding on way forward at joint meeting on 6 February
Proposal is around UK-careers strategy
Questions for you
What sort of things could the Profession do to support you in your career?
Questions for you
What sort of things could the Profession do to support you in your career?
What additional help should be given centrally to Regional Societies?
Questions for you
What sort of things could the Profession do to support you in your career?
What additional help should be given centrally to Regional Societies?
Is there any activity you think the Profession should stop doing?
Questions for you
What sort of things could the Profession do to support you in your career?
What additional help should be given centrally to Regional Societies?
Is there any activity you think the Profession should stop doing?
What specialist forums would you be interested in joining?