In March 2004, the Government asked Sir Derek Morris to undertake a wide-ranging independent review of the actuarial profession. The background to this was Lord Penrose’s Inquiry into the Equitable Life, which highlighted a number of concerns about the actuarial profession. The review focused on three aspects:
The extent of competition and choice in the market for actuarial services;
The regulatory framework for members of the actuarial profession; and
The future role of the Government Actuary’s Department (GAD).
In December 2004, Sir Derek published an interim assessment. This summarised evidence to the review, analysed a wide range of issues that emerged in the course of the review, and put forward proposals for reform. He said that he had no reason to doubt that the overwhelming majority of actuaries in the UK are anything other than dedicated, skilled professionals, providing important and useful advice with commitment, integrity and a strong sense of professional duty. However, he also identified a number of problems faced by the profession in the UK.
These problems included a degree of insularity in its methods and approach; insufficient emphasis on the uncertainties inherent in long-term financial planning; too little transparency in actuarial advice; concern about reserving certain roles to actuaries; and a widespread perception that the actuarial profession had not responded as effectively or as fast as might have been expected to major changes in both demographics and economic conditions in the UK in the previous decade or more.
In his final report in March 2005, Sir Derek concluded there was generally sufficient competition and choice in the market for actuarial services; but to some extent an ‘understanding gap’ between users and advisers inhibited the exercise of choice by users of actuarial advisers. He therefore put forward a number of proposals to improve the scrutiny and challenge of actuarial work, to increase market testing, and to reduce some of the obstacles to a more effective market emerging.
Sir Derek further proposed the introduction of a new regime of independent oversight of the regulation of the profession by the FRC. This would include independent standard setting, oversight of compliance with technical and ethical standards, actuarial training and CPD; more effective scrutiny of actuarial advice; and clearer lines of accountability of actuaries to regulators, to the profession and to clients and employers. He also sought to address the potential conflicts of interest that surround the role of the Scheme Actuary to pension schemes, and made recommendations in relation to the Government Actuary’s Department. His recommendations were accepted by the Government, the FRC and the Institute and Faculty of Actuaries (IFoA).
Further details about the Morris and Penrose Reviews may be found in the National Archives.
The FRC published reports in December 2006 and January 2008 which cover the progress made by the actuarial profession in implementing the recommendations of the Morris Review itself, in so far as they are addressed to the profession.
Our role is to provide independent oversight of the professional body, the Institute and Faculty of Actuaries, in regulating its members. We undertake this role by, amongst other things, reviewing periodically the IFoA's regulatory systems for education and training, continuing professional development, ethical standards and practice guidance, and compliance and discipline.
Based on our work, we will make and follow up recommendations to the IFoA, which retains primary responsibility for the regulation of its members acting in their professional capacity, as well as following up other recommendations such as those made by the Morris Review.