Natasha Regan says that working together is the way to understand actuarial risks
Actuarial work is central to many financial decisions in insurance and pensions and is an important factor in other areas requiring the evaluation of risk and financial returns. High quality actuarial work promotes well-informed decision-making and mitigates risks to users and the public; poor quality actuarial work can result in decisions being made which are detrimental to the public interest
To understand and co-ordinate responses to risks to the public interest where actuarial work is relevant the Financial Reporting Council (FRC) has set up the Joint Forum on Actuarial Regulation (JFAR).
JFAR members are the Financial Reporting Council, the Institute and Faculty of Actuaries, the Financial Conduct Authority, the Pensions Regulator and the Prudential Regulation Authority. It is a unique collaboration between regulators to co-ordinate the identification of, and response to, public interest risks to which actuarial work is relevant.
In October 2014, a discussion paper, Joint Forum on Actuarial Regulation: A risk perspective, was published to gather views on the identification of risks. The paper sets out how the JFAR has identified risks, what they are, and its perspective on areas where actuarial work is relevant to the risk or to its mitigation. There may not necessarily be current evidence of these risks materialising or of poor quality actuarial work but the risks should be assessed and if necessary mitigated.
Actuaries, their clients and employers, other professionals and end-users have until 20 February 2015 to provide feedback to the paper which can be found here.
JFAR is chaired by Stephen Haddrill, CEO of the FRC, who said:
"Actuarial work is vital in promoting trust in financial markets among the millions of UK pensioners and savers and the many investors and investor groups who allocate capital. We want to build justifiable confidence in that work. This paper is very much a 'think-piece' - a vehicle for seeking wider input at this preliminary stage on the JFAR's analysis. In particular we are seeking:
to improve our analysis of risks to the public interest to guide our future work;
to raise awareness of the risks to help mitigate them; and
to inform stakeholders about what regulators are doing.
Actuarial involvement is central to some of the risks (for example in modelling in insurance and pensions). In some areas actuarial work supports decisions that have the potential to create a risk to the public interest (for example in the design and distribution of insurance products). Some of the risks we consider are very broad (for example environmental concerns) and actuarial work is just one strand among many that have an impact on the public interest."
Approach to risk identification
JFAR has adopted a practical approach to identifying risks to the public interest which builds on analyses already performed by each of the regulators. Having identified risks to the public interest and considered the actuarial work component of each, JFAR then selected those which are potentially suitable for a co-ordinated analysis.
The FRC and the IFoA held meetings with a range of actuarial practitioners to gain further insight into risks and issues they and their clients face.
The risks
The discussion paper describes a number of high-level risks to the public interest, outlines underlying drivers of those risks, and explains the potential impact of the risks and the relevance of actuarial work. Within each high-level risk, potential areas for co-ordinated analysis by the JFAR are listed. These 'hotspots' for co-ordination can relate to any current or evolving feature of a risk - including sources of risk, difficult aspects of actuarial work, and potential impacts on vulnerable groups.

By responding to the discussion paper, stakeholders can help determine how individual actuaries, the profession and regulators respond to the risks.
Some risks might already be appropriately mitigated. Other risks might be addressed by raising awareness, providing education, issuing guidance, or monitoring. It is not assumed that there should be more standards or regulation; the collaborative effort of the JFAR will help to ward against any potential duplication.
A feedback statement will be published in the first half of 2015 that summarises the responses and explains how they have affected the risk perspective and the forward agenda for addressing public interest risks to which actuarial work is relevant.
Natasha Regan is project director at the Financial Reporting Council