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Compliance Review of the work of Appointed Actuaries for UK life Companies

The Actuarial Profession is currently consulting on introducing compliance/peer review for actuarial work carried out in a statutory capacity. For Appointed Actuaries in particular, changes in the regulation of the life industry and the Equitable saga mean that compliance review is likely to be introduced soon. The Institute of Actuaries' Life Board has recommended some principles in relation to compliance review of Appointed Actuaries:

  1. Compliance reviewers should be required to meet the same requirements as Appointed Actuaries and to obtain a practising certificate from the profession.
  2. Compliance review should cover FSA Rules and mandatory guidance. The reviews are expected to cover methodology, bases and assumptions, adequacy of controls and documentation of controls.
  3. A new Guidance Note will be issued setting out the required scope of compliance reviews.
  4. Compliance reviews would result in an annual sign-off by the reviewer to coincide with the signing of FSA returns.
  5. The reviewer sign-off would refer to his reasonable belief.
  6. There should be a duty to report to the directors and to the FSA when necessary.
  7. There should be no formal reporting of each review to the profession.

There are considerable practical difficulties in carrying out internal compliance review in smaller offices and for larger offices an internal review will not be seen to be objective in the post-Equitable world. The FSA may also insist on external review. For these reasons, it is likely that the profession will make it mandatory for the compliance reviewer role to be external to the organisation.

Tony Leandro and Pete McGurk, both partners in the Life insurance consultancy practice at Barnett Waddingham, are certified to act as Appointed Actuaries to UK life offices and thus able to perform compliance reviews for life offices. For further information, please contact Tony Leandro, Rajeev Shah or Dave Grimshaw.

Barnett Waddingham, December 2001.