Select Committee on Treasury Appendices to the Minutes of Evidence


Memorandum from the International Underwriting Association of London


  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.


  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.


  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.


  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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