President's address: Setting standards

By the time you read this, two major

consultation exercises will have been

completed. One relates to the framework

for behavioural standards for actuaries,

and the other to the corresponding framework for

technical standards. Having robust but workable

standards is hugely important for the reputation

and effectiveness of the Profession but getting

these frameworks right was never going to be easy.

 

The consultation exercise has brought

widespread support for the overall structure of the

Actuaries’ Code, comprising a series of principles

each with a supporting AP Standard. However,

there have also been calls for significant changes

to be made to parts of the proposed content,

including revisiting the list of principles. As is

typical in such situations, some of the comments

are diametrically opposed, with requests for

public interest aspects of the draft Code to be

strengthened being matched by arguments that

the current wording is too onerous. However,

there are some recurring themes that will need to

be addressed in the next version of the documents.

 

One of the most forceful representations is

from the Professional Oversight Board, which

has submitted a comprehensive and constructive

critique of the draft Code and standards, drawing

on the experience of other professions. Among

other things, this emphasises the importance

of independence of mind and courage, and

the need for mechanisms (such as whistleblowing

obligations) to reduce the vulnerability

of actuaries to bullying. Despite the trend for

statutory actuarial roles to become advisory rather

than decision-taking in nature, having a strong

backbone remains an essential attribute for the

effective performance of these roles. However,

the Profession’s view is that a ‘one-size-fits-all’

approach is not appropriate, and that specific,

more demanding standards are required for

reserved roles, with a less onerous regime applying

to other work where exclusivity and statutory

protections do not apply. An interesting debate

with the Board is in prospect.

 

Discussion of the consultation paper Towards a

Conceptual Framework, issued by the Board for

Actuarial Standards (BAS) in November 2007, is

less well advanced at the time of writing but it

appears destined for an easier ride than the draft

Actuaries’ Code. Proposals in the preliminary

consultation paper issued last April for an

overarching framework of Standard Actuarial

Principles and Techniques have been dropped

in favour of a less ambitious approach, which

recognises that different methodologies are

needed to comply with differing regulatory

requirements and accounting standards. A draft

of the conceptual framework itself is promised

in spring 2008 but this will now be a framework

for technical standards, rather than a framework

for actuarial work or work product. This is a

welcome change of emphasis.

 

A few aspects of the latest consultation

paper seem likely to prove controversial.

The proposal that actuaries should be

required to report the undiscounted

value of projected cash flows as well as

the discounted value surely requires

further thought, as does the proposed

requirement to assess the probability that

any value of liabilities will be sufficient

to discharge those liabilities. Much of

it is common sense, however, and it is now

in everyone’s interests that the conceptual

framework be fi nalised quickly, so that

preparation and updating of technical guidance

can become the main priority for the BAS.

 

Member interest groups

It is now only a month until the Profession’s

new structure takes effect. The changes are

aimed at making the Profession more responsive

to the needs of members, and they will work

best if members are prepared to get involved

and to let us know what they want from their

professional body.

 

One way members can do this is through

member interest groups. To remind you, these are

intended to be relatively informal groupings of

members with a common interest, for example,

the role of actuaries in understanding and

responding to climate change, or equity release

products. Our first experiment in this area, the

Risk Management Special Interest Group (RMSIG),

has been highly successful, attracting over 500

members and large audiences for its networking

evenings. Risk management is being upgraded

under the new structure because of its strategic

importance and emergence as an examination

subject, and will be supported by a practice

executive committee. However, we hope that

many new member interest groups will be formed,

and that they will help take the Profession in new

directions and expand our infl uence.

 

Some groups will be sponsored by practice

areas but others will be created through the

initiative of one or more individual members.

For more details on how to set up a group,

please contact Peter Dingwall at peter.dingwall@

actuaries.org.uk or +44 (0)20 7632 2136.

 

Open forums

A key element of the Profession’s strategy is the

provision of better knowledge-sharing services.

 

One of the initiatives in this area is the

development of open forums. An open forum

discussion may take several forms — face-toface,

web-based or by phone — and will cover

a relevant topical issue. It will be aimed at

members but, where appropriate, people outside

the Profession may be invited to participate. It

may be led or chaired, but people should feel

comfortable to participate and it will not be

a lecture. The objective should be that there

is genuine sharing of knowledge and taking

forward of the debate in a particular area so that

the end product is of suffi cient quality to qualify

as CPD under the Profession’s scheme, verifi able

where practical.

 

Internet-based open forums will run on

wikis and a technical platform for these is being

developed by the Profession’s staff. Face-to-face

meetings may take several forms — networking

evenings of the type run by the RMSIG and

some practice boards would fi t the description of

an open forum, as would the breakfast meetings

held in Edinburgh under the banner of Our

Changing Future.

 

Within the new structure, open forums will

be arranged under the auspices of the Member

Support Executive Committee. An open forum

task force, chaired by Stewart Ritchie, is currently

developing rules for, and practical guidance on

running, open forums. It is expected that a trial

open forum breakfast meeting will be run in

London in March. Please support these events and

activities, and help usher in a new, less formal style

of discussion for actuaries.

 

Nick Dumbreck is president of the Institute of Actuaries