The Transformation of the UK
Actuarial Profession
Or, Remaining Relevant in a Changing World?
By
Adrian Saunders
The Profession in 1980
Not much had changed in 30 years
Life Industry
•
•
•
•
With Profits and mutual offices
Statutory Roles
Status in Management
Regulated by DTI, delegated to the
GAD
• Participation in the profession
encouraged
Examples from Life Industry -1
• 1974-75 Market crash
1400
18.0
UK Equity Index
1200
16.0
14.0
800
13.0
12.0
600
11.0
10.0
400
9.0
1980
1979
1978
1977
1976
1975
1974
1973
1972
8.0
1971
200
Gilt Yields
15.0
1000
1970
Index Value
17.0
UK Gilt Yields
16000
UK Gilt Yields
12000
10000
10.0
8000
8.0
6000
6.0
4000
4.0
2000
2.0
0
0.0
Gilt Yields
14000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Index Value
Changing World 1986-1996
18.0
UK Equity Index
16.0
14.0
12.0
Examples from Life Industry -2
• Mortgage Endowments
Examples from Life Industry -3
• The Equitable
Examples from Life Industry -4
• With Profits Bonds
Reviews….The Lost Decade
2001
Actuarial Profession’s Corley Report
2001
FSA Baird Review -> With Profits
Review
2004
Penrose Report into Equitable
2006
Morris review of Actuarial profession
2007
EU Report on Equitable
Impact on the Profession
• Loss of Appointed Actuary Role
• Losing status within companies
(adviser to the Board rather than
member of Board)
• Increasingly technical modeling work
replacing exercise of judgment
• Lack of visibility as public champion
Examples from Pensions -1
• Schemes in significant surplus
– Revenue concerned that companies were sheltering
excessive profits within schemes
– Finance Act 1986 capped pension fund surpluses and
introduced “Contribution Holidays”
• Government saw an easy fund-raising target:
1997 “Gordon Brown’s Tax Grab”
• Actuarial profession’s response muted.
Examples from Pensions -2
• FRS 17 (2001) Introduced realistic costing of
pension liabilities
– Great work for actuarial consultancies!
– Short term volatility for long term liability
– Accelerated demise of DB schemes and adversely
affected investment policy
• Actuarial Profession’s response muted (strong
differences of opinion amongst Council
members)
This Debate is Still Going On
Where Did This Leave the
Profession?
• The fallout from Equitable damaged the
standing of actuaries in management
and in the eyes of the public
• In pensions, the move away from DB
reduced opportunities, individuals need
increased support
• Increased regulation replaced freedom
and judgment with technical calculation
Hope for the Future?
• New Fields
– General Insurance
– Risk Management
• Growing interest in Risk Management and the
creation of CRO posts provides an opportunity
– If we can rise above super-technical modeling and
capture the CRO role by showing how it is relevant in
practical ways to companies.
A Case Study In The Making?