Casualty Actuarial Society and Canadian Institute of Actuaries Penrose, Morris and Actuarial Standards Lesson from the UK Harvie Brown

Penrose – some lessons for everyone Dominance and arrogance are dangerous All communication s influence expectations Expectations should be provided for Over distribution was the core problem, not guarantees

Penrose – some lessons for everyone A joint opinion from auditor and actuary? Join up the certification of assets and liabilities : “Allowing … the auditors to express a view about the assets … while allowing … the actuary independently to certify the liabilities is like commissioning the two legs of a pair of trousers from different tailors”

Penrose – some lessons for the actuarial profession Not enough challenge of received wisdom Too ‘clubby’ and inward looking – who needs other professionals? Dealing with conflicts of interest Public interest role to expose bad practice proactively Standards too vague “The [actuarial] guidance was far too general and left far too much to individual judgement”

Penrose – some positive comments Praised the independence of the new Discipline Scheme Encouraged more progress on creating an independent Actuarial Standards Board

“Consider what professional and/or other regulatory framework would promote recognised high-quality and continuously developing actuarial standards, openness in the application of actuarial skills, transparency in the professional conduct of actuaries, accountability for their actions and an open and competitive market for actuarial advice in the UK.” The Morris Review

Three strands: nThe role of actuaries, the Profession and the Actuarial Services Market nThe regulatory framework of the Profession nRoles and responsibilities of the Government Actuary’s Department

The Morris Review – the role of actuaries and the actuarial services market Are actuaries fit for purpose? Accountability and the public interest should others be allowed to compete? Reserved roles do actuarial firms compete effectively? Value for Money a lack of diversity? Emphasis on insurance and pensions

The Morris Review – the regulatory framework Can self regulation work in protecting consumers? Peer review Maintaining competence Professional standards/guidance – do processes need reforming? Monitoring, complaints and discipline

The Morris Review – the Profession’s response We welcome competition – but expect the public to want a proper governance framework for practitioners Users have choice in a competitive market We already have a series of important initiatives (which pre-date Penrose) on the go: New syllabus Discipline Scheme Peer Review Maintaining Professional Competence Actuarial Standards Board Our communication skills need to improve to meet modern society’s demands Our new education syllabus will encourage diversity

The Morris Review – next steps Develop recommendations Winter 2004 (February?) Final report Spring 2005 (May?) Interim Assessment Autumn 2004 (December?)

Actuarial Standards – drivers for change Changing expectations and demands of society The perspective of non-actuaries can add great value We’re not the only ones – all professions are under the microscope Conflicting pressures on professional bodies and their members Our processes have, arguably, failed to provide adequate protection to financial consumers

Actuarial Standards – key feature for the 21st century Significant non-actuarial involvement in oversight Don’t duck the awkward questions! Independence from governing bodies Adhere to agreed criteria for a good standard Founded on sound basic actuarial principles that are widely accepted Cover conduct and ethics as well as technical matters

nFit for purpose nComparability between actuaries nInternally technically consistent nConsistency across practice areas nDisclosure of alternatives nDisclosure of limitations of the work nCommunications nAuditable Actuarial Standards – criteria for a good actuarial standard

Actuarial Standards – progress in the UK Broad agreement at senior levels that an independent process is needed Scope and authority still being debated Costs are an important issue Dovetailing with the Morris Review MEANTIME Scrutiny Committee with one third non-actuaries, one the Chairman, established to oversee the production of Guidance by the Boards

Casualty Actuarial Society and Canadian Institute of Actuaries Penrose, Morris and Actuarial Standards Lesson from the UK Harvie Brown