The Board for Actuarial Standards (BAS) today launches a review of the assumptions about mortality made in actuarial calculations, following discussions with The Actuarial Profession, the Financial Services Authority (FSA) and The Pensions Regulator.

Allowance for mortality (or life expectancy) is an important part of actuarial practice, affecting life insurance policies and pension schemes (and their corporate sponsors). The BAS is eager to ensure that all aspects of this complex subject are fully explored through a comprehensive consultation process, leading to a better and wider understanding of the issues and a sound basis for actuarial practice.

The BAS welcomes the opportunity to work with The Actuarial Profession, the FSA and The Pensions Regulator to gather information from a broad range of practitioners and stakeholders. The review will be wide-ranging, addressing current mortality rates and other risk factors, but will initially concentrate on future rates of mortality improvement. The BAS will also work closely with the Professional Oversight Board, which has highlighted the need for actuaries undertaking relevant work to be fully competent in using and interpreting the latest mortality tables and projection techniques. The BAS expects to issue a discussion paper in early 2008, followed by an exposure draft, which may lead to the creation of new standards.

Paul Seymour, Chair of the BAS, said:

 “The BAS is committed to establishing a sound conceptual base for its standards, and to full consultation. Underestimating future mortality improvements can weaken pensioners’ security, but equally, over-estimates can have adverse consequences. Getting the balance right is difficult, given the inevitable uncertainties in this area, but we must make every possible effort to achieve it.”

The BAS also welcomes the publication today by The Actuarial Profession of Working Paper 27, covering mortality projections, which was prepared by the Continuous Mortality Investigation. Working Paper 27 describes a draft “library” of projections, many of which have been previously published. The library performs the useful function of presenting the projections in a standard format and of standardising the terminology used to refer to them.

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy Investigation and Discipline Board) and by the Council. The Committee on Corporate Governance, whose members are drawn from the Council, assists it in its work on corporate governance.
2. The Morris Review of the Actuarial Profession, published in March 2005, recommended that the FRC should take on two new functions: the independent setting of actuarial standards and independent oversight of the UK Actuarial Profession.
3. The Board for Actuarial Standards has as its primary objective the establishment and improvement of actuarial standards, ensuring that they are coherent, consistent and comprehensive, and thereby helping to promote high quality actuarial practice.
4. The remit of the Professional Oversight Board includes the oversight of the way in which the Actuarial Profession exercises regulation of its members acting in their professional capacity. In December 2006, the Professional Oversight Board reported on the Actuarial Profession’s progress in implementing the recommendations made to it by the Morris Review. It recognised the Profession’s progress in implementing a new mandatory continuing professional development scheme, but recommended that the scheme should have an enhanced fast track procedure for emerging issues and concerns. In particular, it highlighted the need for actuaries undertaking relevant work to be fully competent in using and interpreting the latest mortality tables and projection techniques.
5. The FRC is also extending the remit of the Accountancy Investigation and Discipline Board to cover public interest cases involving actuaries.
6. The Morris Review is available on HM Treasury’s website at:
   http://www.hm-treasury.gov.uk/independent_reviews/morris_review/review_morris_index.cfm.
7. All Press enquiries should be directed to: Paul Seymour. Tel: 020 7492 2352. E-mail: p.seymour@frc.org.uk