The Institute and Faculty of Actuaries (IFoA) has raised concerns over the UK government’s white paper that is proposing changes to actuarial regulation.
The IFoA has submitted a response to the government’s consultation on Restoring Trust in Audit and Corporate Governance, in which it pointed out the absence of detail as to how the proposals will work in practice, and the public interest risks that might arise depending on how they are implemented.
The government has proposed that a new UK regulator, the Audit, Reporting and Governance Authority (ARGA) – which will replace the Financial Reporting Council (FRC) – will take on responsibilities for actuarial regulation and oversight of the IFoA.
In its response, IFoA highlighted the fact that there is a critical need for clarity regarding the scope of ARGA’s actuarial technical standards role, including who and what ARGA will regulate and how it will identify which individuals (or entities) are within its remit.
“It is also critical that everyone doing regulated work within ARGA’s scope is subject to the same regulation, not just IFoA members,” the institute noted.
“There is otherwise a real risk of inconsistency and regulatory arbitrage, with potentially only some of those doing particular public interest activities subject to regulation,” it added.
The IFoA has also expressed concern about the proportionality and practicality of introducing actuarial entity regulation, and the related risk that this will duplicate existing sectoral regulation by a number of other regulators.
Finally, the institute’s response also questions the cost effectiveness of maintaining two very similar disciplinary schemes to deal with a relatively small volume of actuarial cases.
Andrew Rear, chair of the IFoA regulation steering group, said: “We want to work with ARGA to provide a regulatory framework that is clear, effective and risk-based in serving the public interest and upholds the standards and reputation of the actuarial profession.”
He said that IFoA supports independent oversight but ARGA “needs to provide sufficient and dedicated actuarial expertise and resource to ensure that regulation of the profession is robust and credible”.
The IFoA submission puts forward several practical suggestions as to how the proposals could work in practice, including for ARGA to provide clearly defined oversight of the IFoA’s UK regulation of actuaries and its technical standards role to apply to a defined list of public interest work and activities.