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TAS 100: General Actuarial Standards v2.0

Contents

The FRC's purpose is to serve the public interest by setting high standards of corporate governance, reporting and audit and by holding to account those responsible for delivering them. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.

The FRC does not accept any liability to any party for any loss, damage or costs however arising, whether directly or indirectly, whether in contract, tort or otherwise from action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from any omission from it.

© The Financial Reporting Council Limited 2023 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 8th Floor, 125 London Wall, London EC2Y 5AS

1. Introduction

1.1Technical Actuarial Standard 100 (TAS 100) v2.0 applies to technical actuarial work that is completed on or after 1 July 2023.

1.2Terms in bold are defined in the Glossary of defined terms used in Technical Actuarial Standard 100, appended to this standard.

Purpose

1.3TASs promote high quality technical actuarial work, supporting the reliability objective:

To allow the intended user to place a high degree of reliance on actuarial information, practitioners must ensure the actuarial information, including the communication of any inherent uncertainty, is relevant, based on transparent and appropriate assumptions, complete and comprehensible.

Scope and compliance

1.4In applying judgement to the application of the TASs it is important to be guided by the reliability objective.

1.5Practitioners are encouraged to have regard to the guidance that accompanies this Standard and, in particular, the guidance on proportionality, to inform how they will comply with this Standard.

1.6TAS 100 must be applied by all members of the Institute and Faculty of Actuaries (IFoA) carrying out technical actuarial work within the geographic scope. Wider adoption is encouraged and other relevant regulators and contracting parties may require entities and individuals who are not members of the IFoA to comply with TAS 100.

1.7Actuarial information that is material must include a statement by the practitioner confirming compliance with TAS 100. Any material caveat, qualification or limitation in that statement must be justified to the intended user. The evidence demonstrating compliance must be available to the intended user, if requested.

General Provisions

1.8This standard consists of Principles and related Application statements[^1]. The Principles set out mandatory requirements.

1.9The Application statements set out regulatory expectations. Practitioners must have regard to these regulatory expectations; divergence may be acceptable, but material deviations must be justified. The justification must demonstrate how compliance with the relevant Principles has been achieved despite not meeting regulatory expectations.

2. Principles

Principle 1 Risk identification

Practitioners carrying out technical actuarial work must identify and consider all relevant material factors and relevant material risks that may affect or have the potential to influence their technical actuarial work and which the practitioner might reasonably be expected to know about at the time of carrying out the work.

P1.1Practitioners must allow for relevant material factors and relevant material risks. A1.1-A1.5

P1.2Practitioners must consider how relevant material factors and relevant material risks are interconnected and allow for any corresponding dependencies, where these are considered material. A1.5

P1.3Practitioners must consider how the profile of relevant material factors and relevant material risks, including their interconnectedness may change within the timeframe the technical actuarial work relates to. A1.1-A1.5

Principle 2 Judgement

Practitioners must exercise judgement in a reasoned and justifiable manner, so that the intended user can rely on the resulting actuarial information.

P2.1Practitioners must base material judgements on supporting justification. A2.1

P2.2Practitioners exercising material judgement must consider credible alternative methodologies, models, data and assumptions.

P2.3Where the practitioner exercises judgement that is material to and formed the basis for an implemented decision that will persist for a period of time, the practitioner must highlight the circumstances that require that judgement to be reviewed to ensure that the implemented decision remains appropriate over that period.

P2.4Where a practitioner exercises judgements that are material (either individually or when combined), the practitioner must consider the potential impact on outcomes from quantitative and/or qualitative perspectives, as appropriate.

Principle 3 Data

Practitioners carrying out technical actuarial work must seek to ensure data is sufficiently accurate, complete and appropriate, so that the intended user can rely on the resulting actuarial information.

P3.1Practitioners must ensure effective checks and controls are applied to data. A3.1, A3.2, A3.5

P3.2Practitioners must identify the extent of any material bias within the data. A3.3, A3.4, A3.5

Principle 4 Assumptions

Assumptions used, or proposed for use, by practitioners in their technical actuarial work must be appropriate, so that the intended user can rely on the resulting actuarial information.

P4.1Practitioners must identify the extent of any material bias within the assumptions. A4.1, A4.2

P4.2Unless set by the intended user, a third party or by regulation, assumptions used by practitioners must be consistent with each other and must be derived from as much relevant information as is sufficient. A4.3

P4.3The practitioner must consider whether the set of assumptions are appropriate when considered in aggregate.

P4.4Where an assumption (or a set of assumptions when considered in aggregate) is set by the intended user or a third party and the practitioner considers the assumption not to be appropriate for its purpose then the practitioner must consider whether this could have a material impact on actuarial information.

Principle 5 Models

Practitioners must ensure models used in their technical actuarial work are fit for purpose and subject to sufficient controls and testing, so that the intended user can rely on the resulting actuarial information.

P5.1Practitioners must ensure they understand the models used in their technical actuarial work, including intended uses and limitations. A5.1

P5.2Practitioners must ensure that the models they use for technical actuarial work have in place an appropriate level of model governance.

P5.3Practitioners must identify the extent of any material biases within the models that are used. A5.2, A5.3

P5.4Where material limitations exist in models or methodologies used, the practitioner must consider the implications of those material limitations.

P5.5Where key stakeholders such as boards, management, sponsors, trustees and regulators require the model to incorporate effects of material actions, practitioners must consider the implications of these actions.

Principle 6 Documentation

Practitioners must ensure documentation relating to their technical actuarial work contains sufficient detail to allow technically competent persons responsible for reviewing or providing assurance in relation to the technical actuarial work to understand the matters involved and assess the judgements made.

P6.1Practitioners must ensure documentation includes the following:

  1. Judgements and their supporting justifications;
  2. Data used; A6.1
  3. Assumptions used; A6.2
  4. How a model used is fit for purpose and what that model does, including intended uses and limitations of the model;
  5. Model governance and associated model controls and testing; A6.3
  6. The implications of any material modelled actions, where these are required by key stakeholders (e.g., boards, management, sponsors, trustees and regulators).

P6.2In case of a material deviation from regulatory expectations, practitioners must document the required justification (see 1.9).

Principle 7 Communications

Practitioners' communications must be clear, comprehensive and comprehensible, so that the intended user can reasonably be expected to understand matters relevant to actuarial information and make informed decisions. Application 7

P7.1Practitioners must ensure the style, structure and content of communications is suited to the skills, understanding and levels of relevant technical knowledge of the intended user.

P7.2In support of the reliability objective, practitioners' communications must include sufficient information in support each of Principles 1 to 5. A7.2-A7.6

P7.3The practitioner's communications must exclude information that is not material if that information obscures material actuarial information, unless the inclusion of such information is a regulatory requirement.

P7.4Practitioners' communications must state the intended user, the standpoint from which the practitioner is acting, the scope and purpose of the relevant technical actuarial work and who commissioned it. A7.1

P7.5Practitioners must confirm in written form any material actuarial information provided orally.

P7.6If a practitioner responsible for a communication becomes aware that the communication has not been understood by the intended user, that practitioner must provide clarification or information to correct the misunderstanding.

3. Application

Application 1 Risk identification

A1.1The relevant material risks to be allowed for by practitioners in their technical actuarial work should include risks associated with the relevant technical actuarial work (for example: mortality, longevity, persistency, premium, catastrophe, other underwriting, market, inflation, expenses, liquidity and tax risks). P1.1, P1.3

A1.2The relevant material factors to be allowed for by practitioners in their technical actuarial work should include all internal or external environmental factors that have the potential to influence the technical actuarial work either directly or indirectly. Internal factors may, for example, include management changes, commercial changes or changes to risk mitigation measures or other factors that could result in the emergence of operational risks. External factors may, for example, include climate change, technological, economic, political and geopolitical, regulatory and legislative changes. P1.1, P1.3

A1.3The practitioner should take account of any relevant legal opinions relating to the technical actuarial work or existing practices relating to the exercise of discretion, where material. P1.1, P1.3

A1.4Where material, practitioners should consider the most plausible risk management actions that might be taken by intended users or other parties in response to risks emerging, the ability to implement these risk management actions and the effectiveness of the assumed risk management actions once implemented. As part of this, the practitioner should consider how other market participants might be exposed to the same factors and risks and consequently, how they might behave. P1.1, P1.3

A1.5The practitioner should consider whether different risks may occur at the same time in response to a specific event limiting the potential ability to diversify the exposures to those individual risks. P1.1 - P1.3

Application 2 Judgement

A2.1The practitioner's supporting justification for material judgements should allow the intended user and other relevant parties (such as peer reviewers, auditors or regulators) to determine whether the judgements are reasonable. P2.1

Application 3 Data

A3.1The practitioner should ensure that the checks and controls applied to data are sufficient to establish whether the data is sufficiently accurate, complete and appropriate. P3.1

A3.2Practitioners should seek to ensure data that is considered insufficient or unreliable is improved to address its deficiencies, for example, by adjusting or supplementing it. P3.1

A3.3In identifying the extent of material bias within data, the practitioner should consider whether any of the factors outlined below exist and whether these suggest that the data are not representative of the population or events of study:

  1. certain elements of the dataset are over- or under-represented, for example, the presence or not of extreme events or outliers;
  2. modifications such as interpolation, extrapolation, adjustment or discarding of outliers were made to the dataset;
  3. the data includes content which is subjective and/or not supported by statistically credible information. P3.2

A3.4If material biases are identified, the practitioner should take reasonable steps to improve the data, by adjusting or supplementing it, if appropriate, to reduce the impact of this bias. P3.2

A3.5Where limitations in actuarial information arise from the use of data that is insufficient, unreliable or contains material bias, the practitioner should assess the impact of these limitations. P3.1, P3.2

Application 4 Assumptions

A4.1In identifying whether assumptions include any material bias the practitioner should consider whether:

  1. any underlying data is biased and the extent and materiality of any such bias;
  2. assumptions contain adjustments to reflect a desired outcome. P4.1

A4.2If material biases are identified, the practitioner should seek to improve the assumptions, by adjusting or supplementing them, if appropriate, to reduce the impact of the identified bias. P4.1

A4.3If insufficient information is available to reliably set an assumption then the practitioner should assess the materiality of that insufficiency by considering the range of possible alternative outcomes. P4.2

Application 5 Models

A5.1In ensuring models are appropriate for their intended use, practitioners should consider whether the model has sufficient regard to extreme events or outliers. P5.1

A5.2In identifying whether models include any material bias, the practitioner should consider whether:

  1. The model leads to consistent overestimation or underestimation;
  2. the model contains systematic error, leading to results that are not representative of the aspect of the world that it is designed to model. P5.3

A5.3If material biases are identified, the practitioner should seek to improve the model, by adjusting it, if appropriate, to reduce the impact of this bias. Where model bias gives rise to material limitations in actuarial information, the practitioner should assess the implications. P5.3

Application 6 Documentation

A6.1The practitioner's documentation of data used should include:

  1. sources and characteristics of data and rationale for the selection of data;
  2. details of grouping of data, including the rationale, the criteria used to determine the groups and the resultant groupings; and the data points removed and the rationale for their removal;
  3. checks and controls that have been applied to that data;
  4. the source and justification of any data proxies;
  5. any actions taken to improve biased, insufficient or unreliable data. P6.1

A6.2The practitioner's documentation of assumptions used should include:

  1. their rationale, including consideration of the consistency between individual assumptions;
  2. commentary on material bias in assumptions and any actions taken to remove it, where relevant. P6.1

A6.3The practitioner should ensure the documentation of model checks and controls includes documented model instructions designed to manage model risk. P6.1

Application 7 Communications

A7.1Practitioners' communications should:

  1. indicate clearly whether the practitioner is acting to comply with statutory or regulatory obligations and, if so, confirm compliance with them; P7.4
  2. indicate clearly the capacity in which the practitioner is acting, e.g., an employee, director or external adviser; P7.4
  3. where there was a previous exercise carried out for the same purpose, include a comparison of results of calculations with the previous results with an explanation of any material differences;
  4. where actuarial information contains prudence, include sufficient information to enable the intended user to understand the level of prudence in the resulting actuarial information, and where there was a previous exercise carried out for the same purpose, should further include an explanation of, and reason for, any material change in the level of prudence from the previous exercise carried out for the same purpose;
  5. clearly define terminology used such as “best estimate”, “central estimate” or other similar terms, so that the intended user can reasonably be expected to understand the nature of these estimates;
  6. state any material changes or material events that are known to have occurred since the effective date of the data. Principle 7

A7.2In support of the risk identification principle, practitioners' communications should state the nature and significance of each material risk or material uncertainty faced by the entity in relation to the technical actuarial work and explain the approach taken to the risk. P7.2

A7.3In support of the judgement principle, practitioners' communications should include:

  1. details of material judgements and the process used to arrive at each judgement. Material judgements should be explained to the intended user and other relevant parties;
  2. descriptions of any alternative models, data or assumptions considered. If no other alternatives were considered the reason should be communicated;
  3. sensitivity of results to judgements that are material either individually or in combination. P7.2

A7.4In support of the data principle, practitioners' communications should:

  1. describe data used, the source of data, the rationale for the selection of data, the checks and controls that have been applied, any material uncertainty in data, and the approach taken to deal with that material uncertainty;
  2. include an explanation of any material limitations in actuarial information resulting from the use of insufficient or unreliable data, or data containing material biases and provide an indication of their impact on actuarial information;
  3. describe any modifications made to data such as interpolation, extrapolation, adjustment or discarding outliers;
  4. include an explanation of any data proxies used and describe their rationale;
  5. include a description of any grouping of data, including the rationale. P7.2

A7.5In support of the assumptions principle, practitioners' communications should:

  1. state the material assumptions describing how they were derived and their rationale including consideration of the consistency of individual assumptions;
  2. where there was a previous exercise carried out for the same purpose, describe any change to a material assumption used in the previous exercise with an explanation of any material difference, and description of any change in the rationale underlying that material assumption;
  3. state whether any assumption was set by the intended user, a third party or by regulation;
  4. where considered material, provide an indication of the impact on actuarial information arising from the use of an assumption (or a set of assumptions when considered in aggregate) which was set by the intended user or a third party and which the practitioner considers not to be appropriate for its purpose;
  5. include an explanation of any material limitations in actuarial information resulting from the use of assumptions based on limited information and provide an indication of their impact on actuarial information;
  6. include an explanation of any material limitations in actuarial information resulting from the use of assumptions containing material biases and provide an indication of their impact on actuarial information. P7.2

A7.6In support of the models principle, practitioners' communications should include:

  1. an explanation of the methodology used and describe its rationale;
  2. where there was a previous exercise carried out for the same purpose, an explanation of any change to a methodology used with an explanation of any material difference, and description of any change in the rationale underlying that methodology;
  3. an explanation of the appropriateness and the intended uses of the model and material limitations of the methodology or models used, and the implications of those material limitations;
  4. an explanation of any material limitations in actuarial information resulting from the use of models containing material biases and provide an indication of their impact on actuarial information;
  5. a description of any material modelled actions and the broad implications of these actions on actuarial information;
  6. where the methodology involves quantifying future cashflows, a description of the nature of the cash flows that are quantified, including their timing. P7.2

4. Glossary of defined terms used in TAS 100
must Statements using the word 'must' set out mandatory requirements.
should Statements using the word 'should' set out regulatory expectations and are intended to assist in compliance with mandatory requirements. Deviation may be acceptable but material deviations will need to be justified. The justification must demonstrate how compliance with mandatory requirements has been achieved despite not meeting regulatory expectations.

Terms in bold in the text of this TAS 100 are used with the definitions set out below. These terms may also be used in the other TASs with the same meaning.

| Term | Definition Footnotes [^1]: A cross-reference to the related Application statement(s) is included at the end of the relevant Principle or provision and a cross reference to the related Principle or provision(s) at the end of each Application statement.

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Name TAS 100: General Actuarial Standards v2.0
Publication date 27 September 2023
Type Standard
Format PDF, 1.4 MB
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