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Opinion President’s comment
Philip Scott is the president of the Institute and Faculty of Actuaries
PHILIP SCOTT
Challenges in Life Actuaries working in the life area are facing challenging times ahead to balance the requirements of increasing regulation and the needs of consumers. A recent visit to the Life Practice Executive Committee (PEC) gave me an insight into how the committee is tackling these current issues. Members of the committee have met regularly with the Financial Services Authority (FSA), now split into the Prudential Regulatory Authority and the Financial Conduct Authority, to discuss issues of mutual interest and future policy. The committee is also providing significant input in the following areas: ● the forthcoming Memorandum of Understanding between the PRA and the FCA, in particular around aspects relevant to the management of with-profits business; ● the evolution of ICA+ as the current ICA regime evolves towards Solvency II; and ● the potential introduction of a recovery and resolution plan regime for insurers. The PEC, with the support of its subcommittees, has helped the Institute and Faculty of Actuaries (IFoA) respond to many of the 80-odd consultations for which responses were submitted in 2012. The assistance requested by and provided to the regulator here has been welcome. Good relationships have been established with the FSA and it is important that this is maintained with the PRA and the FCA to ensure that we influence the successful regulation of the life insurance industry – from a prudential and a customer perspective, both of which are important for consumers. The annual Life conference in Brussels in November last year attracted around 800 delegates and included original papers from the extreme events, life solvency and capital management and longevity catalysts working parties. There were many successful sessions and workshops covering current issues for life assurance companies, which offered significant opportunities for continuing professional development. Topics included: ● resolution planning and living wills for insurance companies; ● insurance accounting; ● PS12/04; ● Solvency II implementation; ● post Retail Distribution Review.
Philip Scott reviews the many elements of work and research undertaken by the Life PEC and its support network The PEC is also considering how best to support overseas members. As part of this, PEC member Nick Dexter, in conjunction with the Actuarial Society of South Africa, has given presentations in both Cape Town and Johannesburg. The Life Research Committee encourages research by volunteers into areas of particular interest to actuaries working in this practice area. For some time, it has sponsored research supporting the assessment of financial adequacy and capital requirements, particularly with a view to the introduction of Solvency II. This includes understanding the issues around extreme event modelling and recently, following a suggestion by a volunteer, how policyholder behaviour may be expected to change in extreme situations. The Life Research Committee has set up several new research working parties in recent months, covering: ● liquidity premiums; ● stress and scenario testing; ● policyholders’ behaviour in extreme conditions; ● the role of actuaries in Life offices; ● management and run-off of with-profits funds. Volunteering is thriving as 27 candidates applied to join the working party to research the management and run-off of with-profits
funds and more will be developed on this topic in coming months Going forward, the Life Research Committee is about to advertise for a working party to look at different ways of meeting customer needs that may emerge and which might challenge existing operating models. Another of the PEC’s aims for the session is to decide how to support members to perform influential risk management roles within the actuarial and risk functions. There is considerable overlap between Life and enterprise risk management (ERM), with many common skill sets required within risk and actuarial functions in life companies. It is envisaged that the Life PEC will continue to support the technical skill requirements with the ERM PEC, contributing some of the more cultural aspects of risk management. One initiative is to give members access to the thoughts of both the actuaries who work in a risk management area and their customers. From any perspective within the life assurance industry, there is still a huge demand for the valuable work done by the Life PEC, its sub-committees and the volunteers that provide such strong support for actuaries working in this field. I would encourage those within the life areas to look for opportunities to participate in, and influence this work. a
“It is important we maintain a good relationship with the PRA and the FCA to ensure we influence the regulation of the life insurance industry”
MAY 2013 • THE ACTUARY www.theactuary.com
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