THE ROLE OF THE ACTUARY IN
PRUDENTIAL SUPERVISION
Michael North
Government Actuary’s Department
The role of the actuary in prudential supervision
What is an Actuary?
>Technical Grounding
>Practical Subjects
>Broader Experience
The role of the actuary in prudential supervision
IAA Core Syllabus - 1
>Financial mathematics
>Probability and mathematical statistics
>Economics
>Accounting
>Modelling
>Statistical methods
The role of the actuary in prudential supervision
IAA Core Syllabus - 2
>Actuarial mathematics
>Life insurance
>General insurance
>Pensions
>Health care
>Investment and asset management
>Principles of actuarial management
>Professionalism
The role of the actuary in prudential supervision
Country
Specific
Application
Technical
Applications
Technical
Pre-entry
Knowledg
e
Pensions
Core
Core
The role of the actuary in prudential supervision
Broader Experience
>Some actuaries remain in a technical role
>But many go on to other roles:
>Finance Director
>Marketing
>Operations/IT
>Managing Director
The role of the actuary in prudential supervision
Elements of supervision
>Authorisation
>Premium rates
>Financial soundness
>Systems and controls
>Policyholder reasonable expectations
>Intervention possibilities
>Provisions for handling insolvency
The role of the actuary in prudential supervision
Life Insurance – Long Term
>Appointed Actuary system?
>Mathematical Reserves – Basis and Calculations
>Assets and ALM
>Premium Rates/Product Design
>Reinsurance
>Business Planning
The role of the actuary in prudential supervision
General Insurance – Short Term
>Premium and Claims reserves
>Asset Liability matching
>Premium rates
>Reinsurance strategy
>DFA (Dynamic Financial analysis)
>Risk Based Capital
>Assessment of credit and operational risk
The role of the actuary in prudential supervision
Government Actuary’s Department in UK
>Independent Government Department
>Provides consultancy services
>Charges fees to cover expenses (non-profit)
>Appointed to advise insurance supervisors
>Experienced actuaries, primarily from the insurance
industry
>Clients include new EU members and Middle Eastern
countries
The role of the actuary in prudential supervision
GAD Services
>Regular review of returns and accounts
>Product authorisation
>New company authorisation (Business Plans)
>Drafting law, regulations, Supervisory returns
>Guidance manuals for companies and supervisors
>On-site inspection manual
>Review of reinsurance arrangements
The role of the actuary in prudential supervision
Looking forward
>Challenges of more open markets
>International accounting standards
>DFA and financial condition reporting
>Increased role for actuaries
>Importance of professional associations
>Increasing internationalisation
The role of the actuary in prudential supervision
Whistle blowing
>Professional responsibility
>Underpinned by legislation
>Interests of policyholders
>Responsibility to company
>Responsibility to regulator
>Need for protection or indemnity?