The Transformation of the UK Actuarial Profession
description
Transcript of The Transformation of the UK Actuarial Profession
The Transformation of the UK Actuarial Profession
Or, Remaining Relevant in a Changing World?
By
Adrian Saunders
The Profession in 1980
Not much had changed in 30 years
Life Industry
• With Profits and mutual offices
• Statutory Roles
• Status in Management
• Regulated by DTI, delegated to the GAD
• Participation in the profession encouraged
Examples from Life Industry -1
• 1974-75 Market crash
200
400
600
800
1000
1200
1400
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
Ind
ex V
alu
e
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
16.0
17.0
18.0
Gilt
Yie
lds
UK Equity Index
UK Gilt Yields
Changing World 1986-1996
0
2000
4000
6000
8000
10000
12000
14000
16000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Ind
ex V
alu
e
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Gilt
Yie
lds
UK Equity Index
UK Gilt Yields
Examples from Life Industry -2
• Mortgage Endowments
Examples from Life Industry -3
• The Equitable
Examples from Life Industry -4
• With Profits Bonds
Reviews….The Lost Decade
2001 Actuarial Profession’s Corley Report
2001 FSA Baird Review -> With Profits Review
2004 Penrose Report into Equitable
2006 Morris review of Actuarial profession
2007 EU Report on Equitable
Impact on the Profession
• Loss of Appointed Actuary Role
• Losing status within companies (adviser to the Board rather than member of Board)
• Increasingly technical modeling work replacing exercise of judgment
• Lack of visibility as public champion
Examples from Pensions -1
• Schemes in significant surplus– Revenue concerned that companies were sheltering
excessive profits within schemes– Finance Act 1986 capped pension fund surpluses and
introduced “Contribution Holidays”
• Government saw an easy fund-raising target: 1997 “Gordon Brown’s Tax Grab”
• Actuarial profession’s response muted.
Examples from Pensions -2
• FRS 17 (2001) Introduced realistic costing of pension liabilities– Great work for actuarial consultancies!– Short term volatility for long term liability– Accelerated demise of DB schemes and adversely
affected investment policy
• Actuarial Profession’s response muted (strong differences of opinion amongst Council members)
This Debate is Still Going On
Where Did This Leave the Profession?
• The fallout from Equitable damaged the standing of actuaries in management and in the eyes of the public
• In pensions, the move away from DB reduced opportunities, individuals need increased support
• Increased regulation replaced freedom and judgment with technical calculation
Hope for the Future?
• New Fields– General Insurance– Risk Management
• Growing interest in Risk Management and the creation of CRO posts provides an opportunity– If we can rise above super-technical modeling and
capture the CRO role by showing how it is relevant in practical ways to companies.
A Case Study In The Making?