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The Actuary The magazine of the Institute & Faculty of Actuaries

Morris Review interim analysis

T he actuarial profession’s response to Sir Derek Morris’s interim analysis (featured in last month’s Actuary) appeared on the deadline day of 4 February, following the consultation meetings held in Glasgow on 17 January and in London on 24 January. (The response and a recording of the latter meeting feature on the profession’s website see below for more information.)
The detailed response echoes the broadly positive stance adopted by the profession in its initial December comment on Sir Derek’s thinking, while acknowledging that a good deal of work is likely to be required to bring to fruition the central recommendation of creating a public oversight regime for the profession. The profession broadly welcomes the suggestion that most of its activities should come within the ambit of the Financial Reporting Council (FRC), while pointing out that issues of organisation and resourcing are likely to be significant challenges particularly so given the relatively small size of the actuarial profession.

Independent body
The profession and most actuaries particularly welcome the likely establishment embedded within the FRC of an independent body to specify standards and practices for both actuarial ‘product’ and for actuaries. This goes further than the profession ever could have achieved within its own powers, and has the potential to quickly restore confidence in actuarial advice.
The profession also is positive regarding public oversight of its educational role (including continuing professional development). All professions find CPD to be a significant challenge in our fast-changing world for example would you want to be in the hands of a doctor who had not kept up with the most recent pharmaceutical developments? Some of the challenge is generic to all professions appropriate balancing of breadth and depth of knowledge, cultivating ethical awareness, and changing emphasis from learning of conventional practice to problem analysis, and knowing ‘where to look’ for possible solutions. The Public Oversight Board for Accountancy is already working with the accountancy bodies on some of these issues.

Education and communication
Educating users of actuarial advice and educating actuaries in effective communication also are familiar themes featuring strongly in Sir Derek’s review. The profession agrees that both are as badly needed as ever (and perhaps always will be). It seems likely that oversight including an external perspective will be helpful in improving standards of communication and disclosure.
The profession recognises the value of oversight of its discipline and compliance monitoring arrangements, while pointing out that for a profession of our size, it is unlikely to be advantageous for these functions to be carried out other than by the profession itself. Work will be required to achieve the right balance of effectiveness (in terms of public confidence) and efficiency (a tolerable cost per individual member).

Public oversight
At the time of writing it is expected that April will be devoted to campaigning for the likely general election in early May, and we understand that Sir Derek intends to do his best to issue his final analysis and recommendations ahead of the campaign. It seems likely that these will focus mainly on the public oversight theme, and that he will limit himself to pointing out the direction that the profession, the FRC, and government should take. The profession has shown itself keen to make progress in relation to all the issues Sir Derek has reviewed.
And what of the stark choice for the profession Sir Derek highlighted in our last issue (between a narrow focus on reserved actuarial roles and a broader promotion of actuarial skills and the actuarial career)? Time alone will tell, but the very positive engagement by the profession with the review process is an encouraging sign!