Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • December 2015
12

TASs: rules, principles and enforcement

Open-access content Monday 30th November 2015 — updated 5.50pm, Wednesday 29th April 2020

Desmond Hudson, chair of the Regulation Board, outlines the practical implications of the shift to principles-based regulation

Much is being made of the shift to principles-based regulation rather than a rules-based or more prescriptive system of regulation. Understandably, practitioners are anxious to understand the practical implications of this approach and what it means for day-to-day practice.

Two recent cases (involving two individuals working in different roles within the same firm) heard before the IFoA Disciplinary Tribunal are among the first to consider interpretation of the Technical Actuarial Standards (TASs).

Importantly, they offer useful guidance and an illustration of what is expected of practitioners applying principles-based standards.

It is worth highlighting that there are two fundamental features of the IFoA's regulatory and disciplinary arrangements.

First, IFoA disciplinary cases do not create formal precedents binding on subsequent tribunals, as can be the case in the court system. That said, tribunals always aim to act consistently, while considering each case on its own merits.

Second, the test applied by tribunals - the offence with which members are 'charged' - is misconduct, rather than, say, a 'charge' of breaching a specific TAS obligation. This is a principles-based test as to whether a member has fallen short of the standards of behaviour, integrity, competence or professional judgment that other members or the public might reasonably expect.

The evidence relied upon in support of that charge will typically relate to a breach of the Actuaries' Code, which, in turn, might arise because of one or more breaches of the Actuarial Profession Standards (APSs) or TASs. Because the fundamental test - misconduct - is principles-based, it follows that, depending critically upon the circumstances, a number of minor breaches of the TASs may not collectively amount to misconduct, whereas a single but more serious breach may well of itself amount to misconduct.

The TASs are themselves intended to be principles-based. In these recent cases (bit.ly/1CzGUR0 and bit.ly/1IR1st3), the principal allegation relied upon to satisfy the charge of misconduct was a failure to discharge the 'reliability objective'. That is, the principle that "users for whom a piece of actuarial information was created should be able to place a high degree of reliance on the information's relevance, transparency of assumptions, completeness and comprehensibility, including the communication of any uncertainty inherent in the information".

At the core of the case presented by the IFoA, and adopted by the Disciplinary Tribunal panel, was the principle that a member cannot simply apply a narrow rules-based approach to the TASs, without at least considering and testing such an approach from the perspective of the reliability objective. The purpose of the regulation, in other words, is to provide the user with reliable advice and information, not simply to ensure that specific TAS rules or particular tasks or requirements are complied with.

After hearing argument and evidence from both parties, the panel said: "The purpose of the regime of TASs and the reliability objective is to be principles-based and not prescriptive regulation. One must review from the top down, and not from the bottom up. When judging whether an actuary has met the reliability objective, it will be important to assess his work against the words of the reliability objective. In doing so, compliance with the TASs is likely to assist in concluding that that objective has been met, but it cannot be inevitable that it has been met. If that were so, then there would be no need for the reliability objective at all."

In similar vein, just as a principles-based approach calls for the exercise of professional judgment, members of the IFoA are not expected to apply a tick-box or superficial approach to regulatory compliance. For example, where peer or work review is appropriate under APS X2, there is little point in completing a shallow process devoid of a real and substantive opportunity for appropriate challenge.

Our regulatory approach, and in particular our adoption of a principles-based approach, at the IFoA aims to reduce the burden of excessively rescriptive or detailed rules and to focus on meaningful outcomes achieved through the exercise of judgment by individual professionals and those who employ them.

Ultimately, the Regulation Board believes, in common with most regulators, that a principles-based approach will produce a better outcome, both for the profession and those who rely upon the profession.

Feedback on the IFoA's regulatory approach is always welcome. Please email [email protected]
This article appeared in our December 2015 issue of The Actuary.
Click here to view this issue
Filed in
12

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Life Actuarial Trainee

England
Up to £55000.00 per annum
Reference
145815

Catastrophe Manager - Top Performing Syndicate

England, London
£70000 - £94000 per annum
Reference
145814

Senior Pricing Analyst

London, England
£40000 - £80000 per annum
Reference
145813
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ