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The Actuary The magazine of the Institute & Faculty of Actuaries

A last word from Nick Dumbreck

For my final column for The Actuary, I had intended to avoid writing about the proposed Faculty/Institute merger — partly because of timing (a lot will happen in the time between the copy deadline and the publication date) but also to limit the risk of overkill. But it’s such an important issue that I couldn’t resist having another go at putting the case for the merger.

The actuarial profession looks set to face major challenges in the coming years, as some of our traditional strongholds decline and we fight to establish our credentials in new areas. Muddling through with an unwieldy governance structure and a confused public image isn’t going to work.

To give ourselves the best chance of success, we need to be a streamlined, cohesive body whose role and objectives are clear to the outside world. This is why Faculty and Institute Councils have both decided overwhelmingly that merger is the best option.

Time to talk
Consultation with members is an important part of the process. There have been suggestions that the consultation is being rushed, and that members should be given an opportunity to consider other options. I have no problem with this but let’s not prolong the process unnecessarily.

We cannot afford to put other important matters on hold indefinitely while we make up our minds. My experience to date of consultation meetings is that members do not take long to grasp the serious shortcomings of the alternative structures put forward so far. This doesn’t mean that the current merger proposal is the only possible way forward but any alternative can only proceed if both Councils are prepared to support it. This effectively limits the range of options to those that would lead to genuine and worthwhile simplification of the current structure.

Areas of concern with the merger arrangements proposed by Councils include loss of the profession’s heritage and the name of the merged body. I see no reason why we cannot retain the history and traditions of the profession in a new body, even if it has a new name — many other institutions have been able to do this. But if it comes to a choice between respecting the past and creating the future, to borrow the title of Stewart Ritchie’s presidential address, we surely have to give priority to the future.

Younger generation
The future of the profession is of greatest importance to the younger members — it’s their careers that are at stake. Yet much of the reaction so far has come from actuaries born before 1945.

While they are of course entitled to have their say, it would be extremely unfortunate if apathy towards the merger proposal among some sections of the membership led to an outcome which was not representative of the wishes of the profession’s members as a whole.

So, please do take this seriously. Take time to read about the proposals, let us know your views at consultation meetings or via the web-based discussion board, and please use your vote when the time comes.

Another concern of both Faculty and Institute members is what happens if Scotland becomes independent. This is specifically catered for in the merger structure by having a Scottish Council, which has a dual function: to ensure that actuaries in Scotland are well served by local activities; and to liaise with the Scottish Government.

The Scottish Council would certainly assume a higher profile if Scotland were to secede from the United Kingdom but its role wouldn’t need to change fundamentally. And it surely makes sense to optimise the profession’s structure for things as they are now, rather than as they might be.

One feature of the merger proposal that has attracted some comment — particularly from past presidents — is the intention that the president of the merged body should serve a one-year term. As I near the end of my time in the hot seat, two years seems to have gone remarkably quickly. There is a risk that shortening the presidential term will lead to some loss of continuity — a risk that is only partially mitigated by having a more formal role for the president elect.

Against this, the president’s job is a demanding and time-consuming one, and retaining a two-year term may unduly restrict the field of candidates. It is for this latter reason that I remain in favour of the proposed change — but the arguments are finely balanced.

…and finally
The massive, widespread and continuing losses resulting from the sub-prime lending binge in the United States have pointed to serious weaknesses in risk management in the financial sector. In his excellent article in the January/February 2008 edition of this magazine (see www.the-actuary. org.uk/688894), John Greenway MP suggested that actuaries had a major part to play in addressing these shortcomings by bringing a more rigorous approach to the assessment and quantification of risks, and by ensuring that boards of directors are aware of the full range of risks to which businesses are exposed.

This is a huge opportunity for the profession, and one which we must grasp. An outstanding discussion at the Institute sessional meeting on this topic on 28 April highlighted not only how much progress has already been made in this area but also how much more remains to be done.

This will be a challenge for the risk management executive committee and the new presidents to take forward.

It has been an honour to be Institute president, and a great pleasure to share the leadership of the UK profession with Stewart Ritchie. I wish Nigel Masters and Ronnie Bowie all the very best as they prepare to take over from us.

Nick Dumbreck is president of the Institute of Actuaries