All change for standards
Is your working life dominated by guidance notes? Do you sometimes feel that you could win Mastermind based on your intimate knowledge of GN9, or that you could recite GN42 in your sleep? Or do you have no idea whether GN12 applies to life, pensions or GI, and don’t really care? Whichever camp you are in, you will probably have to change your outlook over the next few years, as a set of technical actuarial standards (TASs) are introduced by BAS and the GNs adopted from the Actuarial Profession cease to apply. Our proposals are set out in our recent consultation paper, Structure of new BAS standards (and implications for adopted GNs).
The most obvious characteristic of the proposed new TASs is that they will be very different from the adopted GNs. Instead of 37 adopted GNs, mostly focusing on a fairly narrow area of work, there will be fewer than 10 TASs, three of which will be generic, applying right across the main areas of actuarial practice. Currently, adopted GNs are either ‘Recommended Practice’ or ‘Practice Standard’, while the TASs will all be mandatory. And, instead of setting out detailed rules, as some of the GNs do, TASs will be principle-based. All this means that potential Mastermind contestants won’t be able to rely on their existing knowledge of the GNs. Perhaps more importantly, those for whom no adopted GN is relevant might wake up one morning to find that their work is covered by the new TASs.
But, of course, it shouldn’t come to that. By the time the new standards are introduced, they should already be very familiar. This is because each new TAS will undergo two separate consultations, first as a consultation paper setting out and discussing various options, and then as an exposure draft incorporating (and explaining) the decisions we have made. So, all those affected will have plenty of opportunity to express their opinions and influence the outcome.
The concept of generic standards will be a new one to many UK actuaries. We are introducing them for several reasons. They are primarily intended to address the findings of the Morris Review that the existing actuarial standards, as a body, are inconsistent between different practice areas and lack coherence. They will also assist in eliminating duplication between standards, and may help users to understand some of the basic principles underlying the actuarial reports they receive.
New TASs and old GNs
We shall be developing three generic standards over the next year. The first, on reporting, was part of our consultation on the conceptual framework for actuarial standards, and has now been published as an exposure draft. Development of the other two, on data and modelling, has now started, and consultation papers are expected later this year. These three generic standards will cover the main components of actuarial work, and will provide a common core of principles on which the specific standards can be built.
There will probably be five or six specific TASs, depending on the responses that we receive to our consultation. Three will cover the main actuarial fields: long-term insurance; general insurance; and pensions. In addition, there will be TASs on pre-paid funeral plans and business rearrangements (the latter covering matters such as Part VII transfers and the protection of beneficiaries in the context of M&A activity). We are consulting on whether there should be a separate TAS covering actuarial information for inclusion in financial statements. As you can see, even the specific TASs are likely to cover more ground than the adopted GNs.
What will happen to the adopted GNs as the TASs are developed? Well, it will depend on the GN. Now that the BAS’s scope and authority have been formally articulated, we believe that a number of them have no content that falls within BAS’s scope, and are proposing that they should no longer apply from some time later this year. Others have content that will be incorporated in new TASs, both generic and specific — they will stay in force until the new TASs are issued.
We need your input
As you’ll have gathered, the BAS has been busy recently, with four consultations published in two months. It’s an exciting time for all of us, and the momentum will continue over the next few years. But it’s not just the BAS that will be involved. In the short term, the responses to the current consultations will help shape our work. In particular, we’d like comments on the proposals for the structure of the new book of standards and the treatment of adopted GNs.
Longer term, the development of the new TASs will need a lot of input from members of the profession, as well as from others. We will be setting up formal working groups as well as looking for informal opinions, and the contributions we get will be vital in ensuring the quality of the resulting standards.
All BAS consultations are available from www.frc.org.uk/bas/publications/consultation.cfm.
To receive direct notification when BAS consultations are published, register at www.frc.org.uk/bas/register.cfm
Paul Seymour
