I invite you to participate in this consultation by the IFoA’s Regulatory Board (the Board) on proposals to:
APS L1 sets out the duties and responsibilities of Life Assurance Actuaries, including the Practising Certificate (PC) requirements for specific roles relating to UK authorised Insurance Companies and Friendly Societies writing long-term insurance business. Included within APS L1 is the requirement for a PC to be held by IFoA Members who carry out the role of Reviewing Actuary (RA) of a Life firm, a role previously prescribed in statutory regulation.
As a modern, progressive regulatory body, the IFoA considers proportionality in its regulation of its members and, with the removal of the RA role from statute, the Board has been considering the implications for the PC requirements for RAs and whether the requirement remains proportionate and aligned with the PC criteria.
This webpage sets out the Board’s proposals and rationale for removal of the requirement for RAs to hold a PC and the corresponding changes to APS L1.
The Board welcomes comments from individual Members, employers of actuaries, other regulators and anyone else with an interest in the standards which the IFoA sets for its Members.
We thank you for taking the time to consider these proposals and look forward to receiving your comments.
Neil Buckley
Chair of Regulatory Board
When originally introduced, the role of RA was a requirement in statutory regulation (under FSA rules) applying to life insurance companies.
The Supervision Manual section of the FSA’s Rules specified the role of Reviewing Actuary (at SUP 4.3.1R(1)(a)/SUP 4.3.3R) and requirements imposed upon the auditor to UK authorised insurance companies and friendly societies writing long term insurance business.
To reflect the requirement for the specified role of ‘Reviewing Actuary’, the IFoA introduced the Guidance Note GN42 in December 2004, which imposed a requirement on Members appointed as Reviewing Actuaries to acquire a PC. GN42 was withdrawn in 2011 and replaced by APS L1, which still contains the requirement for a Reviewing Actuary to hold a PC .
In 2013/2014 the implementation of Solvency II led to significant changes to the regulatory landscape for insurance (both Life and General Insurance). These included, in particular, the introduction of the Senior Insurance Managers Regime (SIMR), which included a Chief Actuary role but did not extend to any roles relating to audit.
The Reviewing Actuary role requirement was removed from the PRA and FCA Handbooks (which replaced the FSA Rules) and there is therefore no longer a regulatory requirement for such a role.
Instead, the reference is made in a Supervisory Statement which sets out the PRA’s expectations of insurers and audit firms, but which does not have mandatory status. The relevant extract from the Supervisory Statement (SS11/16) is set out below:
Use of actuaries
4.3 ISAs (UK) specify that the auditor shall determine whether, to obtain sufficient appropriate audit evidence, he or she should use the work of an auditor’s expert, and should evaluate the expert’s competence, capabilities and objectivity. As a minimum, for firms that write life insurance business, the PRA expects that auditors, in undertaking the external audit, will obtain and pay due regard to the work of a suitably qualified actuary who is independent of the firm.
The IFoA does not currently have a specific RA PC and, instead, the current requirement set out in APS L1 is that a Member looking to take on the role of RA must hold either a Chief Actuary (Life) PC or a Chief Actuary (Life, Non-Directive) PC, PCs which are required for broader roles than that of an RA.
Under the previous PC Scheme, the IFoA had the ability to issue restricted PCs to Members who did not meet the full technical experience criteria requirements for a PC.
A number of PC’s were previously issued on a restricted basis, permitting the PC holder to carry out the role of RA only. This reflected that the Member did not fully meet the technical criteria for a Chief Actuary PC but did have sufficient experience to act in the role of RA.
Following the recent review of the PC Scheme and with the move to a competency-based approach, there is no longer an option to issue restricted PCs in situations where technical experience is limited to a particular area.
Members in RA roles are therefore required to meet all the competencies set out in the Competency Framework for a Chief Actuary PC.
Given the narrower scope of the RA role and depending on the range of work carried out by a Member from one year to the next, it can be more difficult for Members carrying out the role of RA to meet the full set of competencies required for a Chief Actuary PC.
The PC Scheme is a key part of the IFoA’s UK regulatory framework and sets out the process and the requirements for Members applying for PCs when they are considering taking on the most senior, regulated, UK actuarial roles prescribed in statute or regulation.
When considering roles that may require a PC, the IFoA considers a number of criteria to determine whether it is appropriate to introduce or maintain a PC.
The criteria includes whether the role is prescribed in statute or regulations, whether it is reasonable for the role to be subject to an additional layer of scrutiny, the proportionality of imposing a PC given the nature of the role and the public interest implications.
APS L1 sets out the duties and responsibilities of Life Assurance Actuaries, including the PC requirements for specific roles relating to UK authorised Insurance Companies and Friendly Societies writing long-term insurance business.
In light of the Board’s proposals to remove the requirement for an RA to hold a PC, it is proposed that APS L1 be amended to reflect the changes.
It is proposed that references to the role of Reviewing Actuary are removed from APS L1, including section 5.
To read the proposed changes, download the proposed revised APS L1 (version 4.0) (PDF, 128 KB).
The PC Scheme and PC Handbook set out the requirements and the process for applying for a PC.
It is proposed that both documents be amended to remove all references to the role of, and PC requirements for, Reviewing Actuaries.
The IFoA is interested in understanding whether guidance would be beneficial to support members in the role of Reviewing Actuary should the PC requirement be removed.
The relevant sections of the existing APS L1 could be adapted and used to inform any potential guidance, should the removal of the PC requirement go ahead.
Any proposed guidance will be published alongside the feedback to the consultation and Members and other interested stakeholders will be given an opportunity at that stage to raise any fatal flaw objections before they take effect.
The IFoA is also interested in understanding whether any further resources or regulatory support would be helpful in this area. We look forward to hearing feedback from members as part of this consultation.
In summary, the IFoA proposes to remove the requirement for Reviewing Actuaries to hold a PC and introduce a revised APS L1 (version 4.0), PC Scheme (version 4.2) and PC Handbook (1.2) to reflect the removal of the requirement.
The criteria that the IFoA considers when requiring a PC is aimed at roles that are prescribed in statute or regulations and which are expected to be subject to an extra layer of scrutiny.
The current PC requirement for RAs no longer aligns with this criteria. Furthermore, the current APS L1 requires Members carrying out the RA role to obtain a PC and meet the competencies required for a much broader role.
It is considered that there are already stringent standards placed on auditors to ensure that the experts they use are appropriately experienced and skilled.
It is therefore considered a matter for the professional judgement of the auditor to determine the appropriate actuarial advice required to support the audit for which they are responsible. This is consistent with the approach in relation to other types of professional advice obtained by the auditor to support the audit.
In addition, the PC requirement is inconsistent with that for RAs of a non-Life firm, where a PC is not required.
The proposed changes are designed to help the IFoA meet its Royal Charter objective of protecting the public interest. View the IFoA’s Royal Charter (1.03 MB PDF).
Practising Certificates are one of a range of regulatory measures available to help meet this objective and it is important to highlight that RAs will remain subject to relevant professional and technical regulation. However, the proposal to remove the additional PC requirement is considered more proportionate regulation for this role.
The introduction of guidance would also provide additional support to those Members carrying out RA roles.
The changes are considered by the Board to be proportionate, consistent, transparent and targeted, and have been developed in a way that is principles-based, and outcomes focussed.
The scope of the proposed changes is limited to Members who carry out the role of Reviewing Actuary.
In respect of those Members that will be affected by the changes , the amendments to APS L1 and PC Scheme mean they will no longer require a PC for the role that they are carrying out.
Please provide your response with the (one of the following):
The deadline for responses is 17 November 2023.
Once the consultation has closed, the IFoA will reflect upon the feedback and publish more specific details of any changes. There will also be a period allowed before the changes come into effect so that those affected can take steps to ensure they are able to comply with the new requirements.
Depending on the level and detail of responses, a virtual consultation meeting may be held to discuss the proposals. To help us gauge interest in such an event, we would be grateful if you could inform us of your interest via email at regulation@actuaries.org.uk.
If you have any queries please contact
Regulation, Level 2, Exchange Crescent · 7 Conference Square · Edinburgh · EH3 8RA