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The Actuary The magazine of the Institute & Faculty of Actuaries


The International Actuarial Association (IAA) was formed in 1895, with its primary function being to run international actuarial congresses every four years. During the early 1990s actuaries from a number of different countries realised that more would be required of the profession in an international context. Thus the International Forum of Actuarial Associations (IFAA) was formed in 1995 as a section of the IAA. At the same time the IAA carried out a strategic review which led to the IAA and IFAA being combined in 1998 to form a revamped IAA.

This transformation took place in 1998 at the time of the International Congress of Actuaries in Birmingham. Essentially the new IAA is an association of associations and the governance of the IAA is determined by the associations. Much of the work of the IAA is done by its committees. Decisions are taken by the Council of the IAA which has representatives from each member association.

In order to be a full member of the IAA an actuarial association has to demonstrate that it has appropriate professional standards linked with a disciplinary process. As from 2005 it will also have to demonstrate that its educational requirements are at least equivalent to the IAA guidelines. Associations which do not meet these standards can be admitted as associate members. Each association pays an annual fee to the IAA based on the number of its members.
Each full member of a full member association is automatically an individual member of the IAA. This does not confer any voting rights on individuals, nor does it entail a personal financial contribution. It does not expose you to a further disciplinary process as discipline is entirely handled at the individual association level. It does give you access to the members-only part of the IAA website (www.actuaries.org) it is well worth a visit.

The governance of the IAA is based on a set of statutes and internal regulations. Article 8 of the statutes sets out the important principle of subsidiarity which states that:

The IAA will restrict its activities to strategies and programmes which require international co-ordination or direction, or can be handled more efficiently across national and regional boundaries. It will not become involved with actions at the level of the Member Associations or regional groups of actuarial associations, except at the express invitation of such an association or group.

The IAA will therefore take any measures necessary to avoid duplication or overlap with the activities of Member Associations or regional groups of actuarial associations.

International accounting standards
The increasing prominence of actuarial issues at an international level can particularly be seen in the accounting arena, where the International Accounting Standards Board (IASB) has produced several international financial reporting standards (IFRSs). This has resulted in two significant developments at IAA level. The first concerns a fast-track process for making statements and the second concerns the development of international actuarial standards of practice (IASPs).

Fast-track process
Many international organisations produce documents for comment and expect the IAA to contribute to the debate. This can be a long process. To overcome this problem, the Council at its meeting in June this year approved a fast-track process to be used in cases where an IAA response is required to a third party (such as the IASB) within a timeframe which is not under the control of the IAA.

In the UK, notification of a fast-track request is circulated to FIMC, which then has the opportunity to object to the process.

The globalisation of many standards has forced the IAA to consider the creation of IASPs. Given the principle of subsidiarity mentioned above, it is important to understand the nature of such an IASP.

An IASP adopted by the IAA would not automatically be binding on actuarial associations in relation to their own standard-setting activities in connection with local practice, except in cases where a client advised by the actuary is required, or decides, to comply with the relevant IASP.

A member association can decide whether to:

endorse a particular IASP for use in connection with, say, a relevant IFRS;
adopt it formally for use in relation to local accounting standards or other reporting requirements;
adapt it to produce a locally applicable standard; or
do nothing.
Where a member association decides to adopt a standard which would be applicable in the same or similar circumstances as would require compliance with an IASP or where an actuary might find himself or herself being required to comply with the IASP and the national standard simultaneously, the member association should ensure that its standard does not conflict with the IASP in regard to work which falls within the scope of the IASP. Unless a member association decides on the third course above, the IAA IASP would apply to actuaries practising in that country.

The potential problem of an IASP being in conflict with the law of a particular jurisdiction should be identified during the exposure process. If such a conflict persists, the application of the IASP might be limited in that jurisdiction, or subject to a disclosed deviation.

Insurance IASPs
Currently, several IASPs related to IFRSs affecting insurers are under development. At this time, it has been decided that they will take one of two forms:

u Class 3 IASP or ‘recommended practice’ Actuaries would be expected to follow a recommended practice unless there were sound and defensible reasons for not doing so. Actuaries who do not follow the recommended practice should be prepared to give good account as to why it was felt inappropriate to follow the standard and should disclose the material aspects where they have departed from the standard. A member association may choose to raise the recommended practice to a stronger type of standard locally.

u Class 4 IASP or ‘practice guidelines’ These are educational in nature, representing a statement of good practice (or perhaps practice as generally accepted among actuaries) and intended, for example, to help the client audience to understand better what they should expect from the work product of actuaries in the area in question. They might also serve to show non-actuaries who carry out similar work how the actuarial profession expects to approach the subject.

Process for getting to an IASP
A persuasive case must be made for the IAA to issue a standard. A ‘preliminary exposure draft’ is then issued; the exposure stage lasts for four months. The IAA Council approves the standard (amended as appropriate by the first exposure period) which is then re-exposed as a ‘final exposure draft’. Finally member associations vote on the proposed standard to make it an official IASP. An 80% affirmative vote is required for this to be achieved.

If there are few substantive comments at the preliminary exposure stage, the IAA Council can decide to proceed without a further exposure.

Within the UK, the profession’s Accounting Liaison Group and other related committees will be heavily involved in this process, together with the International Committee and the UK representatives on the relevant IAA committees. The votes of the UK profession will be determined in the final instance by FIMC.

The IAA recently published the first set of preliminary exposure drafts for potential IAA standards regarding IFRSs; comments were required by 19 November. For further information see www.actuaries.org.uk/link/account_liaison/iasp.html.

Peter Clark is chairman of the UK profession’s International Committee