Professionalism and Protection of Public Interests – the Role of Actuaries

Dr David HarePast President, Institute and Faculty of ActuariesIFoA Membre Suppléant, Actuarial Association of Europe6 November 2015

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What does professionalism mean?

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• Different things to different people

• What you do

• How you do it

• Overarching theme of quality

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What is a profession?

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• Three key requirements– Specialist knowledge and training

– Ethical standards and commitment to serving the public interest

– A body with disciplinary powers

• Typically has monopoly over an area of work

• Underpins public trust and confidence

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Institute and Faculty of Actuaries

Our Mission

The objects of the Institute and Faculty of Actuaries shall be, in the public interest, to advance all matters relevant to actuarial science and its applications and to regulate and promote the actuarial profession.

Our Vision

We will serve the public interest by ensuring that where there is uncertainty of future financial outcomes, actuaries are trusted and sought after for their valued analysis and authority.

(Charter of the Institute and Faculty of Actuaries, August 2010)

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How the IFoA contributes to the development of professionalism and expertise

• Robust Qualification framework – FIA, AIA, CAA

• Actuarial code of conduct and relevant standards (e.g. APS X2)

• Professionalism skills training

• Guidance materials and CPD opportunities

• Disciplinary Scheme

• Commissions research – both member-led and external

• Contributes to public policy making process

• Quality Assurance Scheme

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Why introduce the Certified Actuarial Analyst?For candidates

• membership of a globally recognised prestigious body

• globally recognised, portable qualification

• opens up a wide range of financial career options

For employers

• professionalises technical and analytical roles

• aids staff retention and boosts morale

• helps employers to attract the best employees; opportunity to invest appropriately in staff development

For the public interest

• brings those in support roles into a regulatory framework

• relevant and affordable

• promotes actuarial science and capacity building.06 November 2015 5

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Actuaries’ Code

Integrity

Competency and care

Impartiality

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Members will act honestly and with the highest standards of integrity

Members will perform their professional dutiescompetently and with care

Members will communicate effectively and meet all applicable reporting standards

 

Compliance

Communication

Members will not allow bias, conflict of interest, or the undue influence of others to override their professional judgement

Members will comply with all relevant legal, regulatory and professional requirements, take reasonable steps to ensure they are not placed in a position where they are unable tocomply, and will challenge non-compliance by others

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Professionalism skills training

• Online Professional Awareness Test for students

• Online professional skills course for Fellows, Associates, and students 4 to 6 years post admission

• Professional skills training for experienced members: Online case-study-based material available from the Institute and Faculty of Actuaries (IFoA) website

• Other, ad hoc, communications from Regulation Board (e.g. March 2015 letter regarding newly-introduced pensions freedoms; new annual risk outlook)

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We provide relevant training that assists members to understand and fulfil their obligations as professionals

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Disciplinary scheme

• Rigorous process for dealing with complaints

• Independent Disciplinary Board

• Definition of misconduct covers “failure … to comply with the standards of behaviour, integrity or professional judgement which other Members or the public might reasonably expect …”

• Ensure people outside the profession can have confidence in actuaries and their work

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UK Twin regulators

• FSA split into PRA & FCA in April 2013

• PRA & FCA have differing but complementary regulatory objectives

• Memorandum of Understanding

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PRA Regulatory Objectives

The PRA combines • regulation, (it sets standards or policies that

it expects firms to meet.); and• supervision, (it assess the risks that firms

pose). • To promote the safety and soundness of these

firms. • Specifically for insurers, to contribute to the

securing of an appropriate degree of protection for policyholders. 

• As a secondary objective, the PRA has a requirement to facilitate competition.

 The PRA approach to supervision does not seek to operate a “zero-failure” regime. Rather, the PRA seeks to ensure that a financial firm which fails does so in a way that avoids significant disruption to the supply of critical financial services.

Characteristics of the PRA’s approach• A judgement-based approach: • A forward-looking approach: • A focused approach: 

www.bankofengland.co.uk/pra

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FCA Regulatory Objectives

1. Protecting consumers

2. Market integrity

3. Promoting effective competition.

What has FCA said it will do?• Identify and assess risks to consumers

and firms.• Identify the risks that market failures

impact competition.• Make evidence-based policies that

change behaviour.• Prioritise, manage and mitigate risk

consistently.• Establish common standards and

principles. • Put in place the infrastructure to assess

risk.

Risk Outlook: forward-looking areas of focus• Technological developments.• Poor culture and controls. • Large back-books. • Retirement income products and distribution. • The growth of consumer credit.• Excessively complex terms and conditions. • House price growth.

www.frc.org.uk

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UK regulatory roles for actuaries include • Chief Actuary (SIMF 20)

– “must ensure that the Firm’s management are aware at all times of his/her interpretation of its obligations to (a) treat customers fairly; and (b) policyholders’ reasonable expectations which need to be taken into account in assessing the liabilities …”

• With-Profits Actuary (SIMF 21)– “advise the firm's management, at the level of seniority that is

reasonably appropriate, on key aspects of the discretion to be exercised affecting those classes of the with-profits business of the firm in respect of which he has been appointed …”

• Independent Experts– Opinion on not “materially adversely affected” on transfer

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Other UK governance opportunities for actuaries (in addition to NEDs and Pension Trustee roles)

• With-Profits Committee (COBS 20)– “in part, to act in an advisory capacity to inform the decision-making

of a firm's governing body… also acts as a means by which the interests of with-profits policyholders are appropriately considered within a firm's governance structures…”

• Independent Governance Committees (COBS 19.5)– “the IGC will act solely in the interests of relevant policyholders;

assess the ongoing value for money … delivered by [workplace DC contract-based schemes] …; raise with the firm's governing body any concerns it may have in relation to the value for money … ; escalate concerns as appropriate where the firm has not, in the IGC's opinion, addressed those concerns satisfactorily …”

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An idea from our accountancy colleagues

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• Professionalism amongst actuaries is vital

– It covers the what and the how

– It underpins trust and confidence

– It supports financial stability “Ethics is knowing the difference between what you have a right to do, and what it is right to do.” Potter Stewart (American Judge)

Concluding thoughts

Is your integrity more important to you than your income?!

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I’d like to hear your thoughts

Questions? Comments?

Dr David HarePast President, Institute and Faculty of ActuariesIFoA Membre Suppléant, Actuarial Association of Europe6 November 2015