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The Actuary The magazine of the Institute & Faculty of Actuaries

Serving the public interest

he Professional Affairs Board has recently embarked on a major rewrite of the professional conduct standards (PCS), with the aim of producing a short, principles-based document that will be supplemented where appropriate by actuarial practice standards on specific areas of professional behaviour.
Two aspects of the current PCS have given rise to particular difficulties of interpretation by members the whistleblowing requirements and the obligation on the profession to serve the public interest. The latter requirement applies to all professional bodies incorporated by royal charter, and is a requirement of the Privy Council.
Various attempts have been made over the years to clarify what is intended by ‘acting in the public interest’, notably by Jeremy Goford in his presidential address and in an article in The Actuary in April 2003. Now for the first time there is a clear statement on the website (accessed via ‘About the Profession’ and then ‘Public interest role’), drafted by Caroline Instance and agreed by Joint Councils, aimed at achieving a consistent understanding of what our public interest role means in practice. It does not claim to be exhaustive, but explains in simple terms how both the professional bodies, and individual actuaries, are expected to fulfil their public interest duty and also what they are not expected to do. I regard this as an important step forward in addressing this vexed area, and encourage all members to read the statement. Now to tackle whistleblowing

Principles-based actuarial standards
Another important document to emerge recently is the preliminary consultation paper ‘Towards a conceptual framework’ published by the Board for Actuarial Standards (BAS) towards the end of April. Responses to this, and a further consultation paper promised for the autumn, will help to define the shape and content of future technical standards for the profession.
The paper proposes that, initially at least, actuarial standards should focus on the content of ‘actuarial information’ essentially the results of actuarial investigations and calculations. The aim is to facilitate the provision of ‘clear and comparable actuarial information of a reliable and known quality’ to assist decision-makers to reach sensible conclusions. This has to be a laudable ambition.
The paper introduces the concept of ‘standard actuarial principles and techniques’ or ‘SAPT’ the actuarial equivalent of GAAP (generally accepted accounting principles). It also broaches the idea of a series of standard report formats with prescribed contents, with the objective of improving the uniformity of actuarial information. It is relatively easy to see how this would operate for information prepared in response to specific regulatory requirements, but less easy for the wide range of other work done on the basis of an agreed scope defined to meet the needs of the client. There seems to be a risk that SAPT will lead to reduced flexibility in the way we work. This could be a particular issue where actuaries are in competition with non-actuaries who are (at present) unaffected by BAS standards.
The paper says relatively little about the underlying actuarial concepts and principles those will be dealt with in more depth in the follow-up document but it suggests a leaning towards market-consistent approaches to valuation within BAS. How this might affect European embedded value (EEV) calculations in accordance with the current CFO Forum principles, or funding valuations for pension schemes, is as yet unclear.
The result of the current consultation exercise is likely to affect our work for many years to come, and a strong response from members may be critical to achieving a practical, balanced outcome. You have until 6 July to submit your comments.
Pinning down actuarial concepts is not easy and BAS will have its work cut out to produce the next consultation paper. I wonder if autumn will be late this year?

The strategy review
The project to implement the UK profession’s new strategy is now entering its final stages. It is hoped that decisions on all significant outstanding matters will be taken at meetings of Joint Councils during May and June, before the composition of the two Councils changes. Putting in place all the changes that have been agreed will take a little longer, but will generally be handled as part of our ‘business as usual’ activity.
The changes will include:
– new services to members in the areas of knowledge-sharing and careers advice;
– promotion of associateship as a stand-alone qualification suitable for a range of roles in the financial world outside the traditional actuarial strongholds of insurance and pensions;
– revised arrangements for overseas members who elect to be regulated by the local actuarial body in the country in which they are working;
– changes to the governance structure of the UK profession.
Depending on the appetite of Joint Councils for a radical approach, the structural changes may be quite far-reaching. They will be aimed at reinforcing the change of emphasis away from telling members how to do their work (through guidance) towards providing them with the tools and knowledge they need to add value to their employers and/or clients.
The way forward will be clearer by the end of June, and presentations on the outcome will be made at the Faculty OGM on 25 June and the Institute AGM on 2 July. If you would like to learn more, please come to one of these events. An added attraction at the Institute AGM will be a presentation by Paul Thornton on his review of pensions regulation. I look forward to seeing you there.
- Nick Dumbreck