www.the-actuary.org.ukDr Geraldine Kaye explores what has happened in the three years since the role of the appointed actuary was abolished The death of the with-pro64257 ts actuary? Recent research by GAAPS Actuarial has revealed a growing trend among companies to outsource the function of traditional in-house with-pro64257 ts actuaries (WPAs) 8212 a total of 42% are now in 64257 rms of consulting actuaries. On New Year8217s Eve 2004, one of the most senior job functions within the actuarial profession was abolished 8212 that of the appointed actuary. Three years on, the time seems right to 64257 nd out exactly what has happened to the successors of this role and what broader implications this change has had on the wider world of actuaries and life funds.The statutory role of the appointed actuary included the valuation of liabilities to policyholders, monitoring the ongoing solvency position, advising on premium rates, advising on risk, and providing advice on the exercise of discretion towards policyholders. Where with-pro64257 ts policies were involved, it was felt that the burden of due diligence and the duty owed by the appointed actuary to policyholders inevitably created a con64258 ict of interest, as he or she was quite often a director of the life company. It was argued that the risk that they would compromise the protection of the life fund8217s policyholders at the expense of their shareholders and fellow directors was just too great 8212 a decision reached largely as a result of what happened at Equitable Life.With their responsibilities focusing on the fair treatment of policyholders, it is the WPA who can fairly claim to be the true successor to the appointed actuary. A process of transitionMany of the previously independent life companies have either amalgamated into larger insurance company groupings or else have been absorbed into broader-based 64257 nancial services groups. Many with-pro64257 t funds are now run as 8216closed funds8217. Only 35 of the 108 fellows acting as appointed actuaries at the end of 2004 appear on the Financial Services Authority8217s (FSA) list of WPAs at the end of 2006. The rest of these fellows no longer do so, although they presumably account for a signi64257 cant number of the actuarial function holders (AFHs) in the new set-up.For the new regime, this does have some signi64257 cance, as it means that just 35 of the fellows currently acting as WPAs previously held the position of appointed actuary, bringing with them the accumulated experience gained from their previous role, while nearly 40% were newly appointed. Many appointed actuaries who were directors 8212 and some who weren8217t 8212 decided to become the AFH, and appoint a subordinate as WPA. In this way they could retain their board appointment, and their knowledge and skill would still be available to the company. There were even a few appointed actuaries under the old regime who took on neither controlled function, and just remained as 64257 nance director. At an Association of British Insurers seminar in 2004, it became obvious that some companies chose to divide up the roles depending on whether the appointed actuary was a director, and how senior they were. The size and type of company was almost irrelevant. Senior roleThe majority of appointed actuaries were directly employed by the company (or parent company) for which they acted, and most were either directors of their companies or enjoyed a senior management position.The remuneration packages stated in the FSA returns generally indicated that the salaries were paid in respect of the appointee8217s broader management role, of which the appointed actuary function was just one element. It was rarely possible, if ever, to isolate the function of appointed actuary and determine the proportion of the overall remuneration attached solely to that function.In earlier years, a relatively small proportion of companies 8212 but a very large proportion of friendly societies 8212 contracted out the appointed actuary function to 64257 rms of consulting actuaries. For those that did, the 64257 gure in the FSA returns shows the total fees earned by the consultancy from that company. This reason alone inhibited many consultancies from shouldering the burden of the appointed actuary that often only formed a small proportion of the fees shown. Although the copies of the returns supplied to the FSA must contain the 64257 gure for 8216overall remuneration8217 of the WPA (and earlier the appointed actuary), those provided to the public and to other companies do not need to include this information. This loophole was not widely known or, if known, was not being used.Dr Geraldine Kaye is managing director of GAAPS, the specialist actuarial recruitment companyLifeWith-pro64257 ts actuaries40 March 2008187 It would certainly be in no-one8217s interest for the actuarial function to be marginalised and increasingly perceived as little more than a highly technical 8216backroom8217 skill 171040_041_Actuary_Kaye_0308.indd 4019/2/08 12:40:29
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