Casualty Actuarial Societyand

Canadian Institute of Actuaries

Penrose, Morris and Actuarial StandardsLesson from the UK

Harvie Brown

Penrose – some lessons for everyone

Dominance and arrogance are

dangerous

All communication

s influence expectations

Expectations should be

provided for

Over distribution was the core problem, not guarantees

Penrose – some lessons for everyone

A joint opinion from auditor and actuary?

Join up the certification of assets and liabilities:

“Allowing … the auditors to express a view about the assets … while allowing … the actuary independently to certify the liabilities is like commissioning the two legs of a pair of trousers from different tailors”

Penrose – some lessons for the actuarial profession

Not enough challenge of

received wisdom

Too ‘clubby’ and inward looking – who needs other professionals?

Dealing with conflicts of interest

Public interest role to expose bad practice

proactively

Standards too vague“The [actuarial] guidance was far too

general and left far too much to individual judgement”

Penrose – some positive comments

Praised the independence of the

new Discipline Scheme

Encouraged more progress on creating an

independent Actuarial Standards

Board

“Consider what professional and/or other regulatory framework would promote recognised high-quality and continuously developing actuarial standards, openness in the application of actuarial skills, transparency in the professional conduct of actuaries, accountability for their actions and an open and competitive market for actuarial advice in the UK.”

The Morris Review

The Morris Review

Three strands:

The role of actuaries, the Profession and the Actuarial Services Market

The regulatory framework of the Profession

Roles and responsibilities of the Government Actuary’s Department

The Morris Review – the role of actuaries and the actuarial services market

Are actuaries fitfor purpose?

Accountability and the public interest

should others be allowed to compete?

Reserved roles

do actuarial firms compete effectively?

Value for Money

a lack of diversity?

Emphasis on insurance and pensions

The Morris Review – the regulatory framework

Can self regulation work in protecting consumers?

Peer review

Maintaining competence

Professional standards/guidance – do processes need reforming?

Monitoring, complaints and discipline

The Morris Review – the Profession’s response

We welcome competition – but expect the public towant a proper governance framework for practitioners

Users have choice in a competitive market

We already have a series of important initiatives(which pre-date Penrose) on the go: • New syllabus• Discipline Scheme• Peer Review• Maintaining Professional Competence• Actuarial Standards Board

Our communication skills need to improve to meet modern society’s demands

Our new education syllabus will encourage diversity

The Morris Review – next steps

Develop recommendations

Winter 2004 (February?)

Finalreport

Spring 2005(May?)

Interim Assessment

Autumn 2004 (December?)

Actuarial Standards – drivers for change

Changing expectations and demands of society

The perspective of non-actuaries can add great value

We’re not the only ones – all professions are under the microscope

Conflicting pressures on professional bodies and their members

Our processes have, arguably, failed to provide adequate protection to financial consumers

Actuarial Standards – key feature for the 21st century

Significant non-actuarial involvement in oversight

Don’t duck the awkward questions!

Independence from governing bodies

Adhere to agreed criteria for a good

standard

Founded on sound basic actuarial principles that are

widely accepted

Cover conduct and ethics as well as technical matters

Fit for purpose Comparability between actuaries Internally technically consistent Consistency across practice areas Disclosure of alternatives Disclosure of limitations of the work Communications Auditable

Actuarial Standards – criteria for a good actuarial standard

Actuarial Standards – progress in the UK

Broad agreement at senior levels that an

independent process is needed

Scope and authority still being debated

Costs arean important

issue

Dovetailingwith the

Morris Review

MEANTIME

Scrutiny Committee with one third non-actuaries, one the Chairman,

established to oversee the productionof Guidance by the Boards

Casualty Actuarial Societyand

Canadian Institute of Actuaries

Penrose, Morris and Actuarial StandardsLesson from the UK

Harvie Brown