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The Actuary The magazine of the Institute & Faculty of Actuaries
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Paul Seymour

Seamus Creedon: What motivated you to allow your name to go forward for this position?
Paul Seymour: It was a lucky piece of timing. As you know, I have been working as an independent non-exec for the past ten years. Several of my portfolio of directorships, like Marlborough Stirling, had ended in the last 12 months, and I was looking for a new challenge. When the headhunter called, I jumped at the chance.
Having made a clean break from Council a couple of years back, after three terms of office, I was well placed to be independent, but with the advantage of previous close involvement with the profession. I believe the Financial Reporting Council’s (FRC) new role will play a major part in restoring public trust in, and the high reputation of, actuaries. I have had a very rewarding business life myself, and I would like those opportunities to be enhanced and enjoyed by future generations.

What is your preferred composition for the new board as between actuaries and others? What other backgrounds (apart from actuarial practitioners) would you like to see represented on the board?
We have had an excellent response to our advertisement and the FRC plans for the new board to be in place by 1 April 2006. I envisage a board of about a dozen, with observers from FSA, TPR, HMT, DWP, and IAA. We are aiming for three senior actuaries, from each of the major areas: pensions, life, and general. We would like users from these same three sectors, who may happen to be actuaries too. Other stakeholders might be represented: consumers, bankers, finance directors of large PLCs. We may also need some technical skills such as economics. Clearly getting the right mix is critical, but above all we need a strong board who understand the policy issues and can balance the judgements involved.

The Morris Review suggested that ‘a useful early step for the actuarial standard-setting body would be to set out an appropriate conceptual framework, which would include the explicit objectives and characteristics of technical standards’. How and when do you see this being achieved?
We are lucky to have Nigel Bankhead on the board already as director, actuarial standards. He has some excellent thoughts on how coherence might be achieved, and we shall build on the early work of your Scrutiny Committee. This is an area where we can learn from the accountants, who developed their own (Accounting Standards Board) framework about ten years ago, and it took them about three years to complete the project. Bearing in mind that this is a new area, it is proper that there should be extensive consultation during development, which inevitably will mean that it will not be a quick process. Perhaps we can get it done in our first year.
It is important to recognise that an appropriate conceptual framework will represent the foundation of actuarial work and underlie the development of subsequent standards. We must take the time to ensure that such a framework is durable, consistent across the different areas of actuarial practice and reconcilable with the operation of other professions and public expectation.

There appears to be some disagreement between the actuarial and accounting professions as to whether what the IAA calls ‘actuarial standards’ are really more in the nature of educational guidance on practices. How do you think the Accounting Standards Board and the BAS should co-operate to best effect?
I’ve just touched on one important crossover. As we progress I am sure there will be others. Actuarial standards are clearly not the same as accounting standards the room for judgement in assessing outcomes that can span many years is much wider. In any event, those judgements are the responsibility of the boards or trustees receiving our advice. You will remember Morris suggested our early attention to setting a communication standard. We would like any advice from one actuary to be much the same as from another, setting out the probabilities and risks of a range of outcomes. It is not for us to prescribe at what level of confidence reserves should be set, only the standards for measuring such risks.
The Accounting Standards Board (ASB) and BAS have many areas of common interest, which largely relate to quantification of financial liabilities in current terms. Such quantifications should be consistent irrespective of the subject matter in question, unless there is good reason for difference. BAS will work closely with ASB in the development of proposed standards.
Incidentally, on your reference to the IAA, I have looked at a couple of their standards, and I agree that at present they are just good background educational notes, which is fair enough, since both their preambles begin: ‘Practice guidelines are educational and non-binding in nature.’

The Morris Review noted ‘that in future international actuarial standards, like international accounting standards, will play a significant role in the setting of domestic actuarial standards’. How would you like to see this work?
The concept of common standards that are suitable for application in any country makes perfect sense (provided that they can be applied to the different legislative requirements that may be encountered). However, the fact that different standards have been adopted in different countries shows that there is no simple answer to the question of the subjects that standards should cover, or, in any particular subject area, what would be required by a standard. I would hope that the board will co-operate with our international colleagues and make a significant contribution to international practice. Any true international actuarial standards must be some years off yet. ASB to IASB took over ten years!

There appears to be some tension between the role of the board as envisaged by the Morris Review, including for example specifying standards for actuarial communications, and the expectations of the FSA as spelt out by Clive Briault recently that ‘it would be better for the board’s standards to be addressed directly to firms, with the profession setting out how its members should implement these in practice’. What is your own view?
This is an area that may well need to be considered further. However, the current structure is that the profession formally recognises individuals rather than firms, and it is to individuals that the standards apply. It may well be that the regulation of firms could have certain advantages. Our initial concentration will be on the standards themselves rather than the legal structure for their application, but we may need some further statutory powers as time progresses.

Some actuaries have bemoaned what they describe as ‘guidance note (standards) proliferation’ and have suggested that active monitoring and enforcement of ethical standards of conduct should have a higher priority. What is your own view of how to judge whether having a technical standard justifies the costs of development and application?
We should remember what gave rise to all this, namely the Penrose report on the Equitable. Actuaries generally advise institutions, not individuals. Their advice can therefore affect the savings of tens of thousands of consumers. The room for detriment is huge, and in this context the cost of public scrutiny is relatively tiny. For example, even in such a narrow specialist area as reserving for long term care costs in a CCRC, many could be disadvantaged. The profession will remain responsible for setting the ethical standards for actuaries, but will in future be subject to oversight in this area by the Professional Oversight Board. That said, the FRC conducts regulatory impact assessments to evaluate the costs that the introduction of a particular standard may involve.

Lord Turner recently seemed to take the view that defined benefit pension provision was doomed, and with-profits business also is shrinking into insignificance post-Equitable. Is BAS closing the stable door after the horse has bolted? If not, why not?
Your question is tantamount to saying that there is no future for actuaries, which I most certainly do not believe! The nature of their work may change, but the need for their advice on the management of financial risk will increase in a more complex world. As I said at the outset, our object is to enhance the trust in the profession, and that can never be called closing the door after the horse has gone! I am confident that actuaries have skills that will always be in high demand.

How do you believe actuaries individually and the profession collectively can best engage with the work of the new board?
Individual actuaries and the profession will be able to make significant contributions to the work of the new board in two separate ways. The first is by providing the impetus for change. In this respect, it is likely that developments in actuarial research and techniques will emerge from many areas, including work undertaken by academics and the profession. These form a useful starting point in considering whether standards are developed in new areas or whether existing standards should be changed.
The second concerns the process of change. Once it has been agreed that standards are required in respect of a new area or that existing standards need revision, we will consult the profession and individual actuaries, who can both make valuable contributions to the requirements that should apply.
The stimulus of the Morris review has already caused some excellent thought by the profession about how guidance might be structured in future, and that will be most helpful to the new board in designing the framework and underlying principles.

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