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The Actuary The magazine of the Institute & Faculty of Actuaries

Review of the actuarial profession by Sir Derek Morris

Statement by Jeremy Goford, Institute president, and Tom Ross, Faculty president

On Monday [8 March 2004”, the government announced a review of the actuarial profession to be conducted by Sir Derek Morris. The review is to begin on 1 May, when Sir Derek completes his term of office as chairman of the Competition Commission. The government has asked Sir Derek to deliver his final report with recommendations by spring 2005. The terms of reference of the Morris Review, as set out in the government’s announcement (see PDF, professional news).

The Morris Review will be taking place in a profession where there is already a recognition of the need to change. The Councils of the Faculty and the Institute have jointly been conducting reviews of our own as a result of events at the Equitable. In his report on Equitable Life, Lord Penrose acknowledges some of the steps we have already taken and says that the profession ‘should be encouraged in this task’.Last month, we wrote to our members outlining further changes we had decided to make in the way actuaries operate: from the way standards are set and practising certificates issued through to reviewing professional advice and disciplinary action.

Another recommendation made by Lord Penrose is for the profession ‘to accept responsibility for direct intervention where it was thought that the administration of life funds was likely to threaten the legitimate interest of policyholders’. Lord Penrose invites ministers ‘to offer encouragement and support for initiatives the profession might take in this direction’.

This proposal is both interesting and completely new. Currently, the profession has no legal power to intervene in the operation of life offices and does not seek such powers. The profession does not regulate the life industry; that is the job of the FSA. The profession has powers only in relation to individual members. It is reasonable to suppose that a suggestion as specific as this will be considered by Sir Derek Morris as part of his review.

Naturally, we will open our doors to Sir Derek and his team. We have written to Sir Derek today to offer our full co-operation as he carries out his work.

10 March 2004

Terms of reference of the Morris Review

Consider what professional and/or other regulatory framework would best promote recognised, high-quality and continuously developing actuarial standards, openness in the application of actuarial skills, transparency in the professional conduct of actuaries, accountability for their actions, and an open and competitive market for actuarial advice in the UK.

In doing so:

  • take into account developments in the actuarial profession, in regulation, and in the financial services market, in the UK and abroad;
  • examine the role of actuaries in the financial services sector, including in providing actuarial opinions in relation to audited accounts;
  • build on the work of recent government and regulatory initiatives;
  • examine the relationship between the Government Actuary’s Department and the actuarial profession and with other parts of government.

Recommend a framework that will be independent in representing the public and consumer interest, and be accountable, flexible, transparent, and no more burdensome or restrictive than is clearly justified.

Make recommendations on the future role of the government actuary, the functions of his department, and its future institutional status.