IFoA urges actuaries to consider the impact of high inflation

The Institute and Faculty of Actuaries (IFoA) has today (31 August 2022) issued a Risk Alert to all its members on the impact of high inflation. It aims to help bring to the attention of members how current significantly high levels of inflation may affect actuarial practice. It is hoped that the Risk Alert will provide a useful reminder of some of the key issues.

The Risk alert has a particular focus on actuaries working in general and life insurance and pensions. But it states that all members, regardless of practice area, should consider and adjust their work by taking appropriate consideration of:

  • Expectations of future inflation and rationale for selections
  • Different types of inflation, where relevant
  • The impact of the current high inflation environment on underlying methodologies
  • The quantification of uncertainty to ensure the user of the work understands the potential range of plausible and possible outcomes.

Neil Buckley, IFoA Regulatory Board Chair, said:

“The actuarial profession is a key part of the global financial sector which has not operated in a high inflation environment, such as the current one, for many years. We know that members will be aware of the uncertain economic environment and rapidly changing market conditions. By issuing this Risk Alert, we are aiming to bring this issue to the attention of the profession and support members by alerting them to some areas of work which need careful consideration.

“As a royal chartered professional body and regulator, it is our role to highlight external factors that will have significant impact on actuarial practice. It is crucial that we ensure that both the IFoA and its members are acting in the public interest.”