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The Actuary The magazine of the Institute & Faculty of Actuaries

No ivory tower

IFoA Regulation Board chairman Desmond Hudson and the IFoA’s general counsel, Ben Kemp, talk to Chris Seekings about the profession’s evolving regulatory landscape


© Akin Falope

I believe most people want very important work done by professionals that follow appropriately high standards

Tell me about the IFoA’s regulatory structure and how it works in practice?

BK: We are a self-regulatory body, but we aim to regulate in a way that is accountable and transparent. We are subject to independent oversight by the Financial Reporting Council. We have a Royal Charter regulatory responsibility delegated by the IFoA Council to the Regulation Board. We regard the idea of ‘regulation by assent’ as very important. We are not sitting in an ivory tower identifying regulation and passing it down. A huge part of it is bottom-up, drawing on the practitioner community to identify issues and concerns through our practice boards, seminars and conferences. We also draw on our collaboration with regulators and other actuarial associations around the world, as well as what we learn through our disciplinary scheme.

DH: It is a very rare, and I think a very important, privilege for the actuarial profession here in a UK context that we are a profession-led regulator; the idea of self-regulation has disappeared for many professions. It allows us to harness the power and wisdom of the entire profession in dealing with a problem in order to find a way to resolve it. That is one of the hallmarks and benefits, both for actuaries and the wider public, of profession-led regulation, and we try to make the process very open and transparent to everybody.

Once you have identified an issue that needs addressing, how long does it take before you introduce regulation?

DH: That’s difficult to answer, but it is important to know that we do not simply reach for our regulation pen when we encounter a problem or an issue. We ask ourselves whether there is a better way of dealing with a problem, perhaps through education or guidance. Deliberately pausing, thinking carefully about the issue , and talking to the profession is a key feature of what we do. So the gestation period for new regulation can sometimes seem lengthy, but we don’t shirk that because there are advantages to being considered and cautious before introducing regulation. But when we need to move quickly, we do – we can be both nimble and proactive because above all else, we focus on the public interest.

BK: One of a number of advantages to this approach is that, because of the extent of the consultation before we introduce a new standard, we have a reasonable prospect of bringing people with us when we actually launch something. We consult widely, obtaining extensive practitioner input. There is a well-known line that ‘the problem with regulators is that they regulate’, and sometimes you need to resist the urge and think about the broader outcome that you are trying to achieve, and whether introducing new rules is the most useful way of doing that. When we do introduce regulation, it must be well thought-out, sensible and proportionate.

How do you ensure that regulation accommodates the IFoA’s growing international membership?

DH: By way of example, we are consulting on the current review of our Actuaries’ Code, and are engaging particularly with our members overseas to ask if we have lapsed into a way of thinking that is not going to work for our global membership. We want to hear from our international members about how we can frame and write revisions to the code that work for actuaries outside the UK. We have also changed the makeup of our board to seek involvement from individuals beyond the shores of the UK. We are focused on the need to ensure that this is genuinely a global membership working across borders, and our regulation and code have to work in the real world, for all our members today. 

BK: We have also developed an extensive suite of professional skills training materials that we deliver at events all over the world and that are also available digitally, allowing access to our members worldwide. Another example is the Quality Assurance Scheme (QAS), which is a voluntary accreditation promoting standards and professional culture. We have just launched the scheme overseas and we expect our first Asian accreditees to be announced in May at our Bangkok conference. We are also working with members, regulators and associations in different parts of Africa to try to ensure we offer regulation and professional support that is useful for our members in that part of the world.

Is regulation designed for the UK often inappropriate for international members?

DH: We want to be an institution that is a good partner with associations and actuarial bodies around the world. We know that if you are working in a particular jurisdiction, it will have its own laws, regulation and guidance. If an international member is in breach of the Actuaries’ Code, for example, rare though that may be, then it may be that the local association or actuarial body will be the primary one dealing with a disciplinary matter. We are looking to make sure our regulation works in harmony, is aligned with, and respects the codes of other jurisdictions.

BK: At the same time, we recognise that there are markets around the world where our members are operating in less developed regulatory environments. Our aim is to support those members in terms of standards, professionalism and education, and again, do that in collaboration with local bodies and regulators.

Tell me more about the QAS. How many accredited employers are there in the UK and what are your international ambitions?

BK: The scheme has been going in Britain for just over two years, and, in that relatively short space of time, we now have around 35 accredited employers, reflecting more than 25% of our UK membership. QAS is a really positive vehicle to promote quality, consistency and professionalism by working with our members and their employers, without actually imposing disproportionate regulation. We have now removed the geographic restriction and will consider applications from employers of our members wherever they are based. We had a very successful pilot in Singapore, Malaysia and Hong Kong last year, including our first insurer, and anticipate the first non-UK accreditations will be announced shortly.

DH: One of the things that drove the regulation board to wholeheartedly support the launch of QAS, and the expansion beyond the UK, is that we took the view that it could be a good way of regulating more efficiently, voluntary though it is. We are, for example, launching a pilot to see if we can better manage the annual logging and reporting of continuing professional development (CPD) requirements differently through QAS. If that allows us to be more outcome-focused in our approach to individual regulation, this could be good for members, employers and the IFoA, as well as the public.

Is there a possibility that employers will think you are just passing the regulatory burden on to them by measuring CPD through QAS?

BK: That is not what we are doing. What we are trying to do is create a cultural shift around our approach to CPD. CPD is all about maintaining professional competence, which is critical. Employers will naturally know how their people are developing much better than we do, and we are asking them to share with us something that they are already doing and committed to do through QAS, in terms of the commitment to professional training and development. It should be more efficient for us and for them, and reduce some of the compliance burden for individual members.

We have talked about how regulation accommodates international members, but does it restrict actuaries working in new areas like banking and technological development?

BK: Naturally, we hear from members concerned that regulation might stifle their ability to expand into new and emerging areas. It is a legitimate challenge, and one that we are acutely aware of, but we do not believe that maintaining standards and professionalism is incompatible with innovation and entrepreneurialism. Actuaries have always traded on the quality they offer and it would be a mistake to disregard that. On the contrary, we would see it as something that is essential to maintain if actuaries are going to continue to differentiate themselves as high-quality professional people.

DH: A number of people are making the point that recent changes to Technical Actuarial Standards (TAS) make it cheaper to employ a non-actuary who doesn’t have to comply with those standards. But as a non-executive director of a company, would I be happy to allegedly save money by hiring an individual who doesn’t have to abide by these standards? What would shareholders think about that? I don’t think that the way to compete is by bringing standards down, and I believe most people want very important work done by professionals who follow appropriately high standards.

So what are the IFoA’s regulatory priorities for the next 24 months?

BK: We are engaged with some big projects that we have spoken about, but we have no plans for any new standards – we are envisaging, to some extent, a period of consolidation. We are, however, looking at the need for some form of monitoring. We are working on proposals for consultation that are practical and proportional. This is the opportunity for our members to help shape those proposals so that monitoring, if introduced, is both workable and effective. 

DH: There is a potential gap in our regulatory arrangements, such that we might need a sensible, proportionate way of monitoring, that builds upon the work other regulators do when looking at the work of actuaries. I work for a small charity specialising in care for children. When care assistants undertake sessions with children, someone checks the quality of their work. If it is appropriate to have a complementary monitoring system there, it is difficult to argue against having that for actuaries.

I also think this engagement point is very important. There are a number of consultations under way or that will be, which will continue to evolve. We have also very consciously embarked upon a process of trying to do all we reasonably can to help members comply with regulation. We have no doubt that 99.9% of actuaries want to do the right thing, and we want to continue giving guidance, case studies and assistance, responding to concerns and challenges for members.

And how can members get in touch about their regulatory concerns?

BK: We have the Senior Quality Assurance Representatives Forum (bit.ly/2HXfY9R) that provides a useful opportunity for QAS accredited organisations to air relevant issues. We also have a Professional Support Service (bit.ly/2Ff1z5G) where all members can get expert advice through practitioner and executive resource pools. We recognise the word ‘regulation’ may have connotations that people might not necessarily welcome, but if you have views about what we are doing, talk to us and tell us what is concerning you. We might not know, unless you tell us, and we are always open to a conversation.

Desmond Hudson IFoA's Regulation Board chairman

Ben Kemp is IFoA’s general counsel