In our strategy debates, we discussed the importance of adopting a multi-disciplinary approach to problemsolving, in order to tackle the complex and systemic issues facing the profession and wider society.
The IFoA’s Vision, Skillsets, Mindsets, Domains strategy, our desire to rekindle thought leadership, and our public interest role are coalescing. During recent engagement with the Treasury, we called for a wider conversation about the financial sector’s purpose.
Insurance products and pension schemes operate within our regulatory paradigms and frameworks. In our public interest and policy role, the IFoA not only provides feedback on regulatory issues, but also addresses problems embedded within the culture and narrative on which regulatory philosophy is based.
The 2008 financial crisis, COVID-19, numerous financial and accounting scandals and sustainability challenges show the shortcomings of our system, which rests on two flawed beliefs. The first is that markets know best, and maximisation of share price is a proxy for value creation – no longer credible. The second is that financial economics and Basel 3 type risk models can model reality, and are sufficient for managing systemic risks. Clearly, existing risk models cannot capture radical uncertainty and systemic risks.
The current paradigm also defines the roles of corporations and professions. Within corporations, there are too many conflicts of interest, and too much benchmarking and pursuit of growth. This renders them unfit for society’s sustainability needs. There has also been a decline in ethical standards within professions.
Society must move away from self-interest and towards collective interest. We need to embrace longer-term and holistic thinking, recognising the importance of shared purpose, narrative, reciprocity and mutuality. This is not just about actuarial science. It touches on political philosophy, culture, ethics, evolutionary psychology, anthropology, and the history of science and maths.
There is a revolution in economic thinking that aims to create a more sustainable world, and avoid the tragedy of the commons and the tragedy of the horizon. The IFoA must be part of this conversation.
Tan Suee Chieh is the president of the Institute and Faculty of Actuaries