The Actuarial Advisory and Discipline Board (ABCD) was formed to serve the five United States. The ABCD considers complaints and questions related to possible violations of the Code of Professional Conduct. The functions of the regulator and the actuary not only exist symbiotically; actuaries are, to a certain extent, creatures of regulation. The formal role of the actuary is part of the implementation of many regulations.
Actuarial and regulatory functions are generally combined with the shared goal of solving technical problems when market-driven initiatives demand change. While discussions can sometimes seem controversial or even conflicting, most of the time this is the result of different perspectives as to how best to achieve the desired outcome. The right focus on the shared objective of a functional solution and the recognition of differences in perspective will allow actuaries to continue to play an important role as a reliable resource for regulators. In many discussions held during the meetings, emphasis was placed on the efforts of local associations in countries with nascent actuarial professions to implement codes of conduct and internal regulations on qualifications and competencies.
One of the main recommendations of the journal Morris Review of the Actuarial Profession (published in March 2000) was that the self-regulation of the actuarial profession should be subject to independent oversight by the Financial Information Board. The NAIC worked with industry stakeholders and state regulators, including actuaries, to develop a model law that would address these issues effectively. RBC modeling and cash flow testing solutions offer another example of successful cooperation between regulators and actuaries. As a result, the regulations specify the professional credentials required, the nature of the actuarial function, the language required in certifications, and guidelines regarding disclosure.
Despite these overwhelming problems, actuaries provide a valuable service to insurance regulators and government officials. In this case, the actuarial function was codified to address several of the potential deficiencies found in achieving public confidence in regulation. By chance, I gave my ICA speech on self-regulation after a joint presentation on “model standards” by representatives of the IAA and the Actuarial Association of Europe. Like the designated actuary example described above, this is another way in which the professionalism of actuaries facilitates indirect regulatory oversight.
The most obvious example of regulatory participation by actuaries is the role of the appointed actuary. Under the proposals, ARGA will assume legal oversight of the regulatory function of the IFOA and will establish legally binding technical actuarial standards in the United Kingdom. The participation of the actuarial profession was successful both in drafting the model law itself and in the long-term administration of the resulting regulations through the actuarial certification process. After decades of working with regulators, actuaries are well positioned to address these future challenges, and the historic participation of actuaries in regulation provides important guidelines for continued relevance.
Statutory regulators worked with several actuarial organizations both in the development and dissemination of modeling solutions and regulations.