The Transformation of the UK Actuarial Profession

Or, Remaining Relevant in a Changing World?

By

Adrian Saunders

The Profession in 1980

Not much had changed in 30 years

Life Industry

• With Profits and mutual offices

• Statutory Roles

• Status in Management

• Regulated by DTI, delegated to the GAD

• Participation in the profession encouraged

Examples from Life Industry -1

• 1974-75 Market crash

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UK Equity Index

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Examples from Life Industry -2

• Mortgage Endowments

Examples from Life Industry -3

• The Equitable

Examples from Life Industry -4

• With Profits Bonds

Reviews….The Lost Decade

2001 Actuarial Profession’s Corley Report

2001 FSA Baird Review -> With Profits Review

2004 Penrose Report into Equitable

2006 Morris review of Actuarial profession

2007 EU Report on Equitable

Impact on the Profession

• Loss of Appointed Actuary Role

• Losing status within companies (adviser to the Board rather than member of Board)

• Increasingly technical modeling work replacing exercise of judgment

• Lack of visibility as public champion

Examples from Pensions -1

• Schemes in significant surplus– Revenue concerned that companies were sheltering

excessive profits within schemes– Finance Act 1986 capped pension fund surpluses and

introduced “Contribution Holidays”

• Government saw an easy fund-raising target: 1997 “Gordon Brown’s Tax Grab”

• Actuarial profession’s response muted.

Examples from Pensions -2

• FRS 17 (2001) Introduced realistic costing of pension liabilities– Great work for actuarial consultancies!– Short term volatility for long term liability– Accelerated demise of DB schemes and adversely

affected investment policy

• Actuarial Profession’s response muted (strong differences of opinion amongst Council members)

This Debate is Still Going On

Where Did This Leave the Profession?

• The fallout from Equitable damaged the standing of actuaries in management and in the eyes of the public

• In pensions, the move away from DB reduced opportunities, individuals need increased support

• Increased regulation replaced freedom and judgment with technical calculation

Hope for the Future?

• New Fields– General Insurance– Risk Management

• Growing interest in Risk Management and the creation of CRO posts provides an opportunity– If we can rise above super-technical modeling and

capture the CRO role by showing how it is relevant in practical ways to companies.

A Case Study In The Making?