APPENDIX 4
Memorandum from the International Underwriting
Association of London
DEPARTMENTAL INTERACTION
GAD aim to provide independent professional,
actuarial advice of the highest quality to clients in the public
sector at a reasonable cost. This includes advising government
departments, provide the social security projections, demographic
analysis and actuarial advice for Ministerial decision making
and National Insurance calculations as well as providing the actuarial
advice necessary to the FSA in regulating and supervising financial
institutions.
However, the function of advising Ministers
and other departments in decision making and on regulatory issues
could benefit from being improved. This recently became evident
in our own experiences with the Inland Revenue (IR) in the consultation
process on the "Clause 107—Taxation of general insurance
reserves". It is highly likely that valuable advice had not
been sought from GAD by the Inland Revenue in order to clarify
outstanding issues. Had this been the case the consultation process
with IR is likely to have been both easier and smoother. Thus
organisational changes to get GAD more involved in providing advice
to a number of government departments, such as Customs & Excise,
IR, the FSA and possibly the Office for National Statistics, as
this would help to create a seamless advice and decision making
process that is suited to a modern government.
Furthermore, with regards to transparency we
have not yet had sufficient direct interaction with GAD to enable
an objective answer, however it is relatively difficult to find
information about them and their projects, despite having a website.
Funding
We consider it crucial that GAD remains impartial
in the analytical work done on behalf of Government, and as such
public funding would seem necessary. Nevertheless, there is still
scope for the department to remain active as it does have an important
function, even if the insurance industry currently does not utilise
them for actuarial advice on a large scale. Moreover, it is essential
that GAD retain the ability to compete commercially in giving
actuarial advice, whether to public bodies or private bodies.
INDUSTRY INTERACTION
GAD has representatives on the Council of Institute
of Actuaries and chairs the profession's International Committee.
GAD is also represented on many joint professional Boards and
committees of the Faculty and Institute relating to life and general
insurance, pensions, genetics, education and further working parties
and research groups. Additionally, GAD has representatives on
European and International Actuarial Bodies. Apart from this involvement
there seem to be no real working relationship between the insurance
and GAD. We consider there are considerable benefits to be gained
in closer involvement with industry representatives, and government
ministers, in sharing information and knowledge obtained during
the course of these activities.
REGULATION AND
IMPARTIALITY
The transfer of 17 staff from GAD to FSA later
this year is to be considered with caution. Currently GAD provides
the examination of the annual returns to life and general insurance
companies for the FSA and HM Treasury where applicable. Opinion
is also given on the financial position of general insurance companies,
applications for authorisations, and on Lloyd's. As it is important
that GAD remain objective, incorporating GAD staff with the FSA,
thus increasing the regulatory function of the actuaries, may
lead to a conflict of professional interest. This could adversely
affect GAD, as their expertise could be more widely applied to
all areas of prudential regulation, and for obtaining valuable
research on financial analysis.
Although the role of the actuary as regulator
is likely to increase for general insurance companies in the coming
years, as is already the case for life companies with the Appointed
Actuary, caution is advised. As it is the role of GAD to scrutinise
the activities of the Appointed Actuary it would be of utmost
importance not to corrupt that relationship with the actuaries
involved in the regulatory function. The role of the Appointed
Actuary is organised in this way in several countries, such as
Canada, Belgium and Switzerland.
GAD have also participated in giving advice
to government departments regarding the new international accounting
standards and representatives have participated on a European
Commission working party regarding the review of solvency margins.
As previously mentioned it would be very beneficial for the industry
if details of such new developments could be more widely distributed
to ensure that the industry is informed in a timely fashion, of
developments which may impact business decisions.
January 2001
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