Queen’s Speech

Lord Davies of Brixton Excerpts

Monday 16th May 2022 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, first, I must declare my interest as a non-practising member of the Institute and Faculty of Actuaries. That is because I want to use the opportunity to ask the Minister in his reply to tell us more about the draft audit reform Bill mentioned in the introductory speech, and specifically the proposal in the Bill that the audit, reporting and governance authority will have powers to oversee and regulate the actuarial profession.

There are many other issues or gaps in the Government’s programme that I could address, but I have confidence in my noble friends to deal with them. There is not enough time to explain the entire background to the regulation of the actuarial profession, so I hope that the Minister already understands that the decision to introduce statutory regulation is simply a by-product of the broader review of the work currently undertaken by the Financial Reporting Council. No serious concerns have been raised about the current regulatory framework for actuaries since its introduction in 2005, nor have there been any material public interest concerns about the conduct of actuaries in the UK. It is also worth emphasising that almost all the work undertaken by actuaries is regulated in other ways, given the sectors such as insurance and pensions, where they tend to work. Despite the lack of pressure for such change, the proposed changes in the Financial Reporting Council mean that there is a collateral need to rework the regulation of actuarial work.

The Institute and Faculty of Actuaries, of which I am proud to be a fellow, is the UK’s only chartered professional body dedicated to educating, developing and regulating actuaries. The institute sets stringent professional obligations on its members, including qualification standards and ethical conduct requirements. However, there are also technical standards, which are currently set by the Financial Reporting Council.

Consequently, following the wider changes, there is a need to reform actuarial regulation. The institute supports reform that places the regulation of the actuarial profession on a statutory basis. However, there is some concern, which I share, that the scope of actuarial regulation—in other words, who and what is covered—must be adequately defined in any proposals. Otherwise, we could be left in a situation where the regulation of actuaries is significantly less robust than it is now, increasing the risks of inconsistency and regulatory arbitrage. For example, it should not be possible for individuals to self-identify themselves out of the scope of regulation by changing their job title or resigning membership of a professional body. On the other hand, we must avoid a catch-all definition of actuarial work that would be disproportionate.

So, first, statutory regulation should include the protection of the professional title of “actuary”. Most people will be surprised that it is still possible for someone who is not a qualified, regulated member of the institute to describe themselves as an actuary. Secondly, as proposed by the institute, the scope of the new statutory technical regulation should be defined by reference to a list of specific types of activity. No individual should be permitted to do any activity on such a list without being subject to the new statutory technical regulation. In addition, there should be a list of members of the institute who are accountable to ARGA on the statutory regulated work for which they are responsible.

I look forward to the consultation on these issues. In the meantime, will the Minister commit the Government to bring forward the draft Bill as quickly as possible—a timetable would be good—as well as to the closest possible engagement with the representatives of the actuarial profession and to agree that the result of any changes should not lead to any weakening of current levels of regulation?