By Josephine Marks, FCIA, Chair of the Actuarial Standards Board
“Those who do not remember the past are condemned to repeat it.” While this quotation may make us think of the movie “Groundhog Day,” the expression was first coined by Spanish-American philosopher George Santayana, who came up with quite a few quotable quotes. With this theme in mind, let’s explore the history of the actuarial standard-setting process within the Canadian profession and how it relates to the formation and ongoing duties of the Actuarial Standards Board (ASB).
The ASB was formed in 2006 as a result of a governance review that the CIA undertook at that time. One of the headlines that year was the Morris Review in the UK, which was a government-sponsored inquiry into the near-collapse of Equitable Life. The Morris Review identified a number of problems with the UK actuarial profession, including its insularity, lack of transparency, and the influence of entrenched commercial interests. The recommendation resulted in the formation of a separate body to oversee the actuarial profession and set actuarial standards independently from the profession.
The Canadian actuarial profession responded firmly and proactively with the formation of the ASB, which was structured to be independent from the professional association (the CIA), and of the Actuarial Standard Oversight Council (ASOC), which was asked to provide independent oversight of the ASB’s standard setting process. In 2020, further changes were made to expand the role of the ASOC (which was reconstituted as APOB, or the Actuarial Profession Oversight Board) while maintaining their independent oversight of the standard-setting process.
As ASB Chair, I would certainly give us a passing grade in accomplishing what we set out to achieve, but I would caution, as the headline implies, that if we don’t continuously learn from history we may repeat past mistakes – even if these had previously been avoided by the Canadian profession.
Are we too insular? The best actuaries are probably well-rounded, well-educated individuals who have widened their horizons beyond strictly technical actuarial matters. Even within the profession, we sometimes have the bad habit of self-identifying as practice-specific actuaries. As a result, part of what we are doing at the ASB level is encouraging all of our members to actively participate in all discussions, which includes asking tough questions when topics arise outside their comfort zone (i.e., outside their traditional practice areas). Ongoing interaction with our stakeholders, and understanding their points of view, are also important elements of what we do.
Are we transparent? While much of our ASB material is in fact publicly available, including the standards and our meeting minutes, we often fear that “normal people” don’t care much about what we do. However, they may care more than we realize – an APOB member recently mentioned that they had overheard in a bar someone advising a buddy that their pension value might differ depending on whether they were terminating pension plan membership or divorcing their spouse. The implication was that they should do these in the optimal sequence. So, we do need to be more transparent, and one of our current ASB initiatives is to expand on our communication with stakeholders and strengthen our relationships with regulatory bodies whose work is linked to ours.
Finally – are we susceptible to undue influence from commercial interests? This topic was top of mind at our recent annual joint meeting with APOB, and a mini governance review is currently underway to review our due process and documentation as it relates to identifying and addressing any potential conflicts of interest or lack of independence. All of our members are actuarial practitioners (although some are retired) and we do need to be diligent about switching our hats when we enter our virtual ASB meetings and remind ourselves of the public we serve.
Having a strong, independent ASB, with a strong governance oversight process, and a strong and active role for APOB is an important evolution for our profession. The journey must continue.
This article originally appeared in the CIA (e)Bulletin.
This article reflects the opinion of the author and does not represent an official statement of the CIA.