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Preparing for Compliance Review of Appointed Actuaries
Rajeev Shah on the progress of the Compliance Review of Appointed Actuaries.
In October 2001, the Life Board of the Faculty and Institute of Actuaries published agreed principles in relation to compliance reviews of Appointed Actuaries (see our previous article -"Compliance Review of the work of Appointed Actuaries for UK life companies"). These principles were expected to form the basis of a new Guidance Note which would be classified as Practice Standard and therefore mandatory across the profession. This new guidance would introduce compliance review of the statutory duties of the Appointed Actuary including mandatory guidance relating to the Financial Condition Report and disclosure calculations. It was the view of the profession's working party that the reviews should be external and independent to the company. Both the Baird and Corley reports into Equitable Life supported this view.
Matters recently moved on with the publication of a discussion paper by the Actuarial Governance Working Party of the Life Board and the final "issues" paper of the FSA's with-profits review entitled "Governance of with-profits funds and the future role of the Appointed Actuary". The current debate on corporate governance (post-Enron) may also influence the issue. While much remains to be resolved, it seems highly likely that the role of the Appointed Actuary or the actuarial function (if the role of Appointed Actuary were to disappear) will be made subject to an independent external peer review.
It is not yet clear when any regulations, rules or professional guidance will come into force but it could be 31 December 2002. High levels of background/set-up work can be expected and it is sensible for life offices to at least start preparing the ground for peer review now. This will involve a significant time investment by the actuarial functions and would require planning as well as discussion within the actuarial function. External advice on the information and documentation required by the peer reviewer may also be required. (To view a list of some of the preparatory work necessary and issues requiring consideration prior to peer review, click on the link below).
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Barnett Waddingham is offering "workshop" sessions for individual life offices, tailored to their requirements, covering the preparatory work necessary and the issues requiring consideration. For further information, contact Tony Leandro, Rajeev Shah or Dave Grimshaw.
Rajeev Shah, May 2002.