Speech by Stephen Haddrill at The Morris Review: 10 years on... - 16 April 2015
News types: Speeches
Published: 17 April 2015
Stephen Haddrill
CEO, Financial Reporting Council
Welcome and successes of the Morris Review
The Morris Review: 10 years on…
16 April 2015
FRC Offices
Hello and welcome to this special event to mark the 10th anniversary of the Morris Review. Throughout the evening, we intend to reflect on the achievements made over the past 10 years since this Review of the actuarial profession and look to what the future might hold for the profession.
At the time of the Review Sir Derek Morris, who we are delighted to have with us this evening, said that while he had no reason to doubt that the majority of actuaries in this country are dedicated, skilled professionals with a strong sense of professional duty there were 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 and too little transparency in actuarial advice.
The FRC came to be involved in the regulation of actuaries following the Morris Review, when HM Treasury asked us to take on responsibility for oversight of the regulation of actuaries by the Institute and Faculty of Actuaries and for the independent setting of technical actuarial standards. In July 2014, the FRC and IFoA confirmed in a Statement on Actuarial Standards their respective remits for setting standards following a review of responsibilities carried out in 2013. The FRC continues to set technical actuarial standards for work carried out within the UK and the IFoA remains responsible for setting ethical standards for all of its members, and for work outside the UK.
The FRC’s independence enables it to work with, but also to challenge the IFoA when necessary, on matters such as the development of its professional code and its policy on conflicts of interest. We have also contributed to the development of compliance review standards and the IFoA’s Quality Assurance Scheme. 10 years on, we are now reflecting on the FRC strategy for overseeing the conduct of the actuarial profession and how we might continue to enhance the effectiveness of our procedures.
Since the FRC became responsible for setting technical actuarial standards we have published 7 of these TASs which replaced a large number of guidance notes. The standards are outcomes focused, aiming to help users. We believe the new standards have also provided greater focus on risk and uncertainty and the purpose of the work. Stakeholder feedback suggests that the quality of actuarial communication, a particular criticism by the Review, has got better although there is still room for improvement. We have recently consulted on a new framework for to make standards easier to use.
We have also established a new body – the Joint Forum on Actuarial Regulation (JFAR) – consisting of the PRA, FCA, tPR and the IFoA. This body meets regularly, shares information drawn from the supervisory work of each and considers risks to the public interest. With considerable input from JFAR we recently published our risk perspective which sets out areas where we have identified significant potential risks and where actuarial work may have an important role.
Over the past 10 years, the profession has made advances globally as well as in the UK. Actuarial work has become more international with an increasing proportion of the IFoA’s members work overseas. Regulation has also become international with the creation of the European Insurance and Occupational Pensions Authority (EIOPA) and the implementation of Solvency II and the emergence of the International Actuarial Association which encourages more consistent approaches across regions through its new standards. We seek to support the work of the IAA and look forward to continuing international convergence.
Now looking ahead, the profession in the UK and globally faces some issues of fundamental importance to the economy, the insurance and pension industries and the consumer.
Pension reform in the UK has changed the pensions landscape. Actuaries will be involved in the development of new pension products including alternatives to traditional annuity. There will also be challenges for actuaries advising defined benefit schemes with the possibility of a significant number of members wanting to transfer to take advantage of the new pension freedoms.
In general, actuarial work will continue to be of global economic significance in the low interest rate environment. Modelling the future against the uncertainties of this environment is a considerable challenge of the greatest economic significance. The question is whether the profession will rise to the challenge.
Our survey of confidence in the profession has indicated some encouraging trends. Stakeholders have gained confidence in the profession in recent years. 96% of those surveyed by Ipsos Mori for us were very or fairly confident in the integrity of the profession itself. 81% of those surveyed were confident in the clarity of the information.
This is both good news and a good platform from which to tackle the new challenges that lie ahead. Confident in the support of users and other stakeholders, actuaries can find the strength to tackle uncertainty and face up to those who may have some ill-conceived responses.
The actuarial profession has deep roots in expertise, in an independent spirit and in its commitment to the public interest. It can look forward to the next 10 years proud of its part and strong for the future.