Actuarial Profession s Strategy after the Morris Review Stewart Ritchie Hong Kong 27 September 2006
The trigger was the 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 Profession s 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 within UK Profession was 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)
Main recommendation: FRC oversight Set up Board for Actuarial Standards Suggested a communication standard as first job Independent oversight of UKProfession 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 UK public interest cases involving individual actuaries
FRC Revised Structure Board Council Board for Actuarial Standards Accounting Standards Board Auditing Practices Board Oversight Board Review Panel Accountancy and Actuarial Discipline Board
FRC Change Project Treasury sponsored (committed to implementing Morris in total their closure to Equitable/Penrose), therefore with UK focus Voluntary at this stage (via MoU) full legislative backing unlikely for 2 to 5 years Implication in short term is that the new regime can only mirror current arrangements enforcement is through the Profession
FRC Changes Legislation to provide indemnity for FRC as regulator to cover extended role to underpin funding Following consultation on funding, the Profession to pay 10% - 170k in 2006/7 with pensions and insurance industries 45% each BAS went live from 1 April 2006, handover of GNs from 18 May 2006
Work over next year Finalise discipline proposals then have consultation/ voting by membership on these Supply lots of data to Oversight Board Develop new arrangements for the setting of Actuarial (mainly ethical) standards and Information and Advisory Notes. Review of Professional Conduct Standards Review of Discipline Schemes which were introduced in 2004 Business as usual Work on implementation of Strategy Review
Reasons for having a strategic review 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 Change creates opportunities
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
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
Councils and Members views Question in favour against Grow reserved roles? Subs. subsidise compliance? Broaden? University-only bases CT exams? 2 tier qualification? Rounded actuaries? Expand overseas?
Way Forward Strategic focus will be to support members throughout their careers so they have the skills, attributes and knowledge appropriate for the evolving needs of the UK financial sector, primarily as quantitative risk professionals.
Supporting members throughout their careers 20 30 40 50 60 70
Management of Strategy Implementation Managed by Programme Board on which Presidents sit Aim to complete by July 2007 Decisions taken by Joint Councils Strategy covers business as usual activities but priorities change in future. Continuing work includes: education, networking/community, standards, discipline, PR, information sharing, stakeholder liaison and engaging members
Seven work stream projects 1. Knowledge services: to significantly improve the range of services in the following areas sharing knowledge developing skills career support research website networking
Seven work stream projects 2. Increase university provision of qualification subjects Core technical Encouraged by Morris
Seven work stream projects 3. Qualifications and branding: re-branding the two-tier actuarial qualifications (currently Fellow and Associate ) in order to increase the supply of actuaries Generalist qualification supported by strategic research Previously agreed by Councils Associate can call themselves an Actuary
Seven work stream projects 4. Regulatory liaison: developing means by which we can work proactively with all UK regulators Meet standards Reinforce confidence in actuaries
Seven work stream projects 5. Overseas: reviewing the UK Profession s existing services to overseas members and students Honour commitments to existing members Maintain international standing of qualification Will be issuing a questonnaire to all non-uk based members Other input can be made to the Project Manager, Caroline Instance caroline.instance@actuaries.org.uk
Seven work stream projects 5. Overseas project (continued): there are three strands Provision of services and how that relates to a fair subscription Regulation and discipline: what standards should apply, how should discipline be handled (particularly if also a member of another IAA affiliated body) Ensuring UK input to IAA/ Groupe Consultatif is effective and links to current UK practice activity
Seven work stream projects Work on next two work stream dependent on output of other projects 6. Fair financing: reducing cross subsidies and provinding value for money 7. Structure: reorganise the structures of the professional body to deliver the new strategy Redistribute resources from guidance activity Increase efficiency and effectiveness