Insurance TAS Post-Implementation Review Yorkshire Actuarial Society Natasha Regan & John Instance 9 September 2013 Financial Reporting Council

Insurance TAS Post-Implementation Review

Yorkshire Actuarial SocietyNatasha Regan & John Instance

9 September 2013

Financial Reporting Council

Agenda

• Introduction – the FRC• Actuaries and the public interest• Actuarial framework and TAS scope review• Questions for discussion• Survey results


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Introduction - the FRC

• What is the FRC– the UK's independent regulator responsible for promoting

high quality corporate governance and reporting to foster investment.

• What does it do– sets the framework of codes and standards for the

accounting, auditing, actuarial and investor communities– oversees the conduct of the professionals involved.

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Actuaries and the public interest

• Actuarial work and the public interest– Risk mitigation and reporting– Advice for decision making

• Importance of the technical quality of actuarial work• The reliability objective of the TASs:

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The users for whom a piece of actuarial information was created should be able to place a high degree of reliance on the information’s relevance, transparency of assumptions, completeness and comprehensibility, including the communication of any uncertainty


Actuarial Framework and TAS Scope Review

• Insurance TAS applies to specified work from 1 October 2011• FRC seeking feedback from practitioners and users

– Publish results in December 2013

• Results feed in to a review of the TASs to be carried out in 2014 – we will develop and seek views on proposals to restructure the

TASs so that we have:• high level principles which are recognised as applicable across all

professional actuarial work; and• more narrowly focused specific standards where there is a need for

additional requirements in the public interest beyond the high level principles and the requirements of the IFoA and the statutory regulators.

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Questions for discussion

• What is actuarial work?

• What obligations should actuaries have in relation to product quality and fairness?

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Survey - The impact of the TASs

Yorkshire Actuarial Society

Results – 3rd September 2013

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Respondents’ fields of work

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Life Insurance General Insurance Insurance (other) Non-insurance0

5

10

15

20

25

How would you describe your field of work?


How would you describe the main focus of your work?

3

3

7

4

11

1

Pricing

Reserving

Capital modelling / risk man-agement

Combination of pricing/reserving/capital

Other actuarial

Other non-actuarial


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What proportion of your work do you estimate is covered by the TASs?

10

1

4

5

7

12

None

Up to 10%

Up to 25%

Up to 50%

More than 50%

• “Non actuarial risk identification and management”

• “Reviewing technical actuarial papers (which are normally covered by the TASs but my review isn’t)”

• “Running the financial side of a psychotherapy business”


The scope of the Insurance TAS

• “Wouldn't want it to be any wider.”• “Just covered what broadly was being done anyway.”

Too narrow About right Too wide0

5

10

15

20

25

11


Clarity of TASs

• On a scale of 1 to 5, the TASs are:

• “The root principles of TAS are sound but the way the standards are expressed is, in places, unclear.”

• “The whole TAS documentation structure is horrible – it does not conform to TAS-R!”

• “The difference between component reports and aggregate reports. The definition of what is actuarial work”

1 – Very Clear

2 3 – Clear when

familiar

4 5 – Not at all clear

Average rating

0 4 15 9 1 3.24

12


Process change due to TAS M

• “It was just tweaks to existing processes and peer review.”

• “The main difficulty is encouraging others to sign up to the TAS M principles.”

• “Main difficulties were in re-visiting documentation for legacy models and re-creating testing to demonstrate as fit for purpose.”

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Yes, signifcantly

Yes, to some extent

No

0 2 4 6 8 101214161820

Have you changed any pro-cesses as a result of TAS M?


Effect of TASs on reports• “There is a push to

shorten reports, so TAS has not been helpful in that respect and we find ourselves being criticised for it by non-Actuarial colleagues.”

• “I am not convinced that the extra information is actually being read by those for whom the reports are prepared.”

Following the introduction of the Insurance TAS reserve reports are:

14

4

6

1

Longer but with the extra in-formation help-ing users

Longer but with the extra infor-mation of no use

No different


Is it helpful to have a separate Transformations TAS?

1

5

23

Yes No

Don't know

“Some of With Profit items cause unnecessary extra burden where there is already substantial governance”

15


Wider issues

Are there wider issues (eg - Product quality, fairness) that you consider we should include in our review of the TASs?

Yes – 2

No – 25

• “Actuaries are not always the best placed to assess product quality or fairness (although they sometimes think they are), so TASs should be kept solely to the core areas of actuarial expertise”

• “For the moment the workload of TAS is very onerous, so to extend it now would be difficult to manage”

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Users’ awareness of TASs

17

4

13

11 Aware of the TASs and their broad content

Aware of the TASs but not what's in them

Not aware of the TASs


Implementation of TASs

18

4

23

2

A significant burden

A bit of extra work

Not a lot of work


Ongoing cost of TAS compliance

19

• “Reports are generally longer (need to consider if over-complying) and additional documentation (although this has been a beneficial step-change, in my view)”

• “The costs are a little larger, but that is mainly because TAS is not fully taken seriously in my view. If it was then the costs would be significantly greater.”

9

19

Compared to costs before the TASs were introduced, ongoing

costs are:

Greater

Broadly unchanged


Support on the introduction of the TASs

20

13

13There was ad-equate support

There could have been more support


• “More guidance on how to interpret and apply proportionality.”

• “ Regular training and reminders to members, including examples of good and bad TAS practice - particularly with respect to reports.”

Forthcoming review of the TASs

21

16

2

7

4

What would be your preferred outcome from a review of the TASs?

Would prefer if changes are kept to a min-imum

Major changes are required, it might be sensible to start again from scratch

A refresh is needed to keep up-to-date, and some redraft would be useful to improve clarity

I would like to see specific changes (please detail briefly below)

• Bring the "scope of actuarial standards" piece into a concise page in each TAS

• The situation with aggregate and component reports needs to be significantly clarified.


Further comments / questions

• “TASs could be very powerful in improving standards of work and documentation. However, lack of engagement on TAS with users of information means the value is not understood. In particular, the disparity between information produced by different professions (eg actuaries and accountants)”

• “The whole approach to TAS should be looked at and a new standard produced that focus more on the real areas of risk / concern”

• “I support principle based approach and less prescription, encouraging the actuary to think about what the "right" thing is - don't back down !”

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Questions and Discussion

Contact details– John Instance (Life): [email protected]– Natasha Regan (GI): [email protected]– Robert Inglis (Pensions): r.inglis@frc

.org.uk

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mailto:[email protected]





Documents

Insurance TAS Post-Implementation Review Yorkshire Actuarial Society Natasha Regan & John Instance 9 September 2013 Financial Reporting Council