Amit Jeena covers the Institute’s latest Insights session on APRA’s paper the “Review of the role of the Appointed Actuary and actuarial advice within insurers”, presented by Peter Kohlhagen, senior manager in APRA’s policy development area.
The role of the Appointed Actuary has been a hot topic in the industry over a number of years. In June 2016, APRA released a paper entitled, “The role of the Appointed Actuary and actuarial advice within insurers” which sparked numerous responses from the industry. After reviewing the feedback received, APRA subsequently released the response paper on the “Review of the role of the Appointed Actuary and actuarial advice within insurers” on 28 September 2017.
To take us through the key points in the paper, the Actuaries Institute hosted an Insights session on Wednesday, 17 October 2017. The rationale of the original APRA paper, as described by APRA member Mr Geoff Summerhayes, was to take a “significant step forward in putting the role on a sustainable footing and ensuring that Appointed Actuaries are able to make their important prudential contribution”. The updated paper aims to address any outstanding issues raised and encourage feedback going forward to ensure that the new standards are robust and encompass the views of all industry players.
You can find both APRA papers, draft prudential standards and guide, and industry responses to the first paper here.
The session was chaired by the Institute’s Elayne Grace and presented by Peter Kohlhagen who has been a senior manager in APRA’s policy development area since January 2015.
Peter’s presentation summarised APRA’s original views, industry comments received and APRA’s responses for the issues in the paper including:
- the purpose statement for Appointed Actuaries;
- the actuarial advice framework;
- management of conflicts of interest;
- reporting requirements; and
- the harmonisation of prudential standards across industries.
While the presentation did not delve into anything beyond the bounds of the response paper, the Q&A session raised many interesting questions of which two in particular stood out:
The first was on whether there would be enforcement by APRA for Appointed Actuaries to whistle-blow for breaches in the actuarial advice framework by the insurer. Peter’s response was that although this breach would not fall under the scope of the Insurance Act and so would not be enforced, it should be best practice for the Appointed Actuary to inform APRA of such a breach.
The second was on what transition period would be allowed to move to the new framework. Peter’s response was that APRA usually gives flexibility to insurers but transition time would normally be between 6 and 12 months. However, APRA is open to industry comments on transition time.
A copy of the presentation by Peter can be found here.
My perspective on the event was that not only was it an eloquent summary of APRA’s responses, it also demonstrated how open APRA is to listening to feedback from the industry. Peter began his presentation by saying that there is still more work to be done and that all of us need to work together to ensure the Appointed Actuary role remains a strategic and valuable one.
This key message clearly demonstrates how committed APRA is to creating and developing a framework that marks the strategic importance of the Appointed Actuary role. In doing so, it aligns with APRA’s vision of a safe and stable financial system.
APRA is requesting responses by 15 December 2017 from the Boards of Insurers, Institute working groups as well as Appointed Actuaries. In fact, APRA challenged the audience to think deeply about these issues and to challenge the status quo. In Peter’s words, the paper should be regarded as the first step in the “evolution not the revolution” of the role of the Appointed Actuary.
It was also positive to see that questions raised by the audience on, for example, the wording of the purpose statement were met with tolerance rather than defensiveness – no response would be too trivial for APRA to consider.
My take-home message to you is to accept APRA’s challenge and provide insightful responses to any issues you feel should be raised. It is not the responsibility of Appointed Actuaries or the Institute working groups to solely drive the responses– it is up to all of us. Speak to your managers and colleagues and let us drive the discussion to make a difference. After all, this is probably the last opportunity for responses before the final prudential standards and guide are published. As Bill Clinton once said, “the price of doing the same old thing is far higher than the price of change.”
Iain Bulcraig is chairing a working group on behalf of the Actuaries Institute on this matter, please get in touch if you wish to discuss anything further at IBULCRAIG@scor.com
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