JFAR’s latest risk perspective highlights the importance of changing trends to actuarial work
26 April 2019
The Joint Forum on Actuarial Regulation (JFAR) has today published its Risk Perspective: 2018 Update
setting out its collective view on current risks to high quality actuarial work.
In its report the JFAR - a collaboration between regulators involved in actuarial work - has reconfirmed nine distinctive risk hotspots impacting actuarial work. The hotspots relate to current or emerging risks which, due to their changing nature or level of uncertainty, pose increased risk to the public interest. These are:
- political and legislative risk;
- regulatory change;
- market performance and uncertainty;
- climate-related risk;
- financial security;
- pension scheme management;
- technological change - automation and digitisation, Big Data, Artificial Intelligence and cyber risk;
- terrorism and cyber-crime; and
It is recommended actuaries take these hotspots into account when advising decision-makers and collaborate with other experts and users of actuarial work to mitigate the risk to the public interest. Technological change in the transport industry, for example, is occurring at a rapid pace and may require changes to the data, models or assumptions currently used by actuaries. New technology like pay-as-you-drive apps could dramatically alter the claims experience for motor insurers and actuaries should ensure their advice to decision-makers reflects the latest developments.
While hotspots should be monitored by actuaries to enable them to provide risk mitigation, many may also give rise to opportunities. For example, actuaries may be able to help users model climate-related risks, use new data sources to help design products for vulnerable groups, or advise on the new types of pension schemes coming out of Department for Work and Pensions consultations.
Stephen Haddrill, CEO of the Financial Reporting Council and Chair of the JFAR, said:
“Actuaries play a key role advising decision-makers across a wide range of subjects and industries including the insurance, pensions and investment industries. We live in a time of relentless change affecting all aspects of society and the economy which increases risk and uncertainty for actuarial work. By raising awareness of these risk hotspots and sharing knowledge, the JFAR hopes to encourage actuaries, employers and users of actuarial work to collaborate effectively, to mitigate the risks to high quality actuarial work and to explore opportunities in the public interest.”
In 2017, the JFAR introduced its Actuarial Risk Identification Architecture (ARIA) to identify risk hotspots. The ARIA is used to review the macro environmental drivers, risks inherent in actuarial work and the market characteristics which currently lead to an increase in risk. This year the JFAR reconfirms the continuing relevance of the nine hotspots, provides an update on the key developments over 2018 for each and provides links to further reading so that actuaries, their employers and users of actuarial work can continue to make informed decisions.
Read the full report here
The JFAR intends the Risk Perspective to raise awareness and generate discussion and it welcomes feedback by email to firstname.lastname@example.org.
Notes to editors:
- The FRC’s mission is to promote transparency and integrity in business. 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 Joint Forum on Actuarial Regulation (JFAR) was established in 2013 by the Financial Reporting Council (FRC), the Institute and Faculty of Actuaries (IFoA), the Financial Conduct Authority (FCA), the Pensions Regulator (TPR) and the Prudential Regulation Authority (PRA). The JFAR is a collaboration between regulators involved in actuarial work to co-ordinate, within the context of its members’ objectives, the identification and analysis of public interest risks to which actuarial work is relevant.
- Since 2014, the JFAR has published its Risk Perspective and this is the fifth such report.The report will be supplemented by online content. The Risk Perspective sets out the collective view of the regulators on risks to high quality actuarial work arising from current issues. It is intended to raise awareness of the risks and potential mitigations, seek views on the risks identified, and guide the JFAR’s future work
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