Actuaries

Part

SUP Supervision manual

Chapter

Actuaries

Printed on: 06/11/2024

Rulebook at: 01/05/2006

SUP 4

Actuaries

SUP 4.1

Application

31/12/2004

SUP 4.1.1

This chapter applies to:

(1) every firm within a category listed in column (1) of the table in SUP 4.1.3 R; and

(2) every actuary appointed under this chapter;

in accordance with column (2) of that table.

31/12/2004

SUP 4.1.2

This chapter applies to long-term insurers (including friendly societies) and other friendly societies and to the Society of Lloyd's and managing agents at Lloyd's. This chapter does not apply to actuaries advising the auditors of long-term insurers under IPRU(INS) 9.35(1A) or IPRU(FSOC) 5.11(2A), as they are not appointed to act on behalf of the firm.

01/01/2005

SUP 4.1.3

Applicable sections

(1)

Category of firm

(2) Applicable sections

(1)

A long-term insurer, other than:

SUP 4.1, SUP 4.2, SUP 4.3 and SUP 4.5

(a)

a registered friendly society which is a non-directive friendly society;

(b)

an incorporated friendly society that is a flat rate benefits business friendly society; and

(c)

an incoming EEA firm

(2)

A friendly society, other than a friendly society within (1).

SUP 4.1, SUP 4.2, SUP 4.4 and SUP 4.5

(3)

A Lloyd's managing agent, in respect of each syndicate it manages

SUP 4.1, SUP 4.2, SUP 4.5, SUP 4.6

(4)

The Society of Lloyd's

SUP 4.1, SUP 4.2, SUP 4.5, SUP 4.6

01/01/2005

SUP 4.2

Purpose

31/12/2004

SUP 4.2.1

Section 340 of the Act gives the FSA power to make rules requiring an authorised person, or an authorised person falling into a specified class, to appoint an actuary . Section 340 further empowers the FSA to make rules governing the manner, timing and notification to the FSAof such an appointment and, where an appointment is not made, for the FSA to make an appointment on the firm's behalf. The FSA's rule-making powers under section 340 of the Act also extend to an actuary's duties and to the cessation of an actuary's term of office.

31/12/2004

SUP 4.2.2

This chapter defines the relationship between firms and their actuaries and clarifies the role which actuaries play in the FSA's monitoring of firms' compliance with the requirements and standards under the regulatory system. The chapter sets out rules and guidance on the appointment of actuaries, and the termination of their term of office, as well as setting out their respective rights and duties. The purpose of the chapter is to ensure that:

(1) long-term insurers (other than certain friendly societies) have access to adequate actuarial advice, both in valuing their liabilities to policyholders and in exercising discretion affecting the interests of their with-profits policyholders; and
(2) other friendly societies carrying on insurance business (and which have traditionally relied upon actuarial expertise) employ or use an actuary of appropriate seniority and experience to evaluate the liabilities of that business; and
(3) managing agents of Lloyd's syndicates employ or use an actuary of appropriate seniority and experience to evaluate the liabilities associated with insurance business carried on at Lloyd's.

01/01/2005

SUP 4.2.3

The functions described by SUP 4.2.2 G (1) are performed by one or more actuaries who are required to hold office continuously and must be approved persons. The principal duty of an actuary appointed to perform these functions is to advise the firm (see SUP 4.3.13 R to SUP 4.3.18 G for the rights and duties of such an actuary).

31/12/2004

SUP 4.2.4

The function described by SUP 4.2.2 G (2) is performed by an appropriate actuary who is appointed to prepare the triennial investigation and interim certificate or statement required by IPRU(FSOC) 5.2(1) (see SUP 4.4.6 R and SUP 4.5.12 G to SUP 4.5.14 G for the rights and duties of an appropriate actuary).

31/12/2004

SUP 4.2.5

Actuaries act as a valuable source of information to the FSA in carrying out its functions. For example, in determining whether a firm satisfies the threshold conditions, the FSA has regard to whether the firm has appointed an actuary with sufficient experience in the areas of business to be conducted by the firm (COND 2.5.7 G (11)).

31/12/2004

SUP 4.2.6

In making appointments under this chapter and in allocating duties to actuaries, firms are reminded of their obligation under SYSC 2.1.1 R to maintain a clear and appropriate apportionment of significant responsibilities so that it is clear who has which of those responsibilities and that the business and affairs of the firm can be adequately monitored and controlled by the directors, relevant senior managers and governing body of the firm.

31/12/2004

SUP 4.3

Appointment of actuaries

31/12/2004

Appointment by firms

SUP 4.3.1

A firm to which this section applies (see SUP 4.1) must:

(1) appoint one or more actuaries to perform:

(a) the actuarial function (see SUP 4.3.13 R) in respect of all classes of its long-term insurance business; and

(b) the with-profits actuary function (see SUP 4.3.16A R) in respect of all classes of its with-profits business (if any);

(2) notify the FSA , without delay, when it is aware that a vacancy in the office of any such actuary will arise or has arisen, giving the reason for the vacancy;

(3) appoint an actuary to fill any such vacancy that has arisen; and

(4) ensure a replacement actuary can take up office at the time the vacancy arises or as soon as is reasonably practicable after that.

31/12/2004

SUP 4.3.2

The provisions relating to the duties of an actuary appointed to perform these functions are set out in SUP 4.3.13 R to SUP 4.3.18 G. The functions performed by actuaries appointed by a firm under SUP 4.3.1 R are specified as controlled functions (CF 12, the actuarial function, and CF 12A, the with-profits actuary function) in SUP 10 ( Approved persons). As a result, an application must be made to the FSA under section 60 of the Act (Applications for approval) for approval of the person proposing to take up such an appointment. Section 61(3) of the Act (Determination of applications) gives the FSA three months to grant its approval or give a warning notice that it proposes to refuse the application. A firm should not appoint an actuary until the FSA has approved the actuary. In order to comply with SUP 4.3.1 R, a firm should ensure it applies to the FSA as soon as practicable before the date when it needs the actuary to take office. The FSA will need time to consider the application before deciding whether to grant approval. See SUP 10 ( Approved persons).

31/12/2004

Appointment by the FSA

SUP 4.3.3

If a firm, which is required to appoint one or more actuaries under SUP 4.3.1 R, fails to do so within 28 days of a vacancy arising, the FSA may appoint one or more actuaries to perform any function corresponding to the actuarial function or the with-profits actuary function on the following terms:

(1) the actuary to be remunerated by the firm on the basis agreed between the actuary and the firm or, in the absence of agreement, on a reasonable basis; and

(2) the actuary to hold office until he resigns or the firm appoints another actuary.

31/12/2004

SUP 4.3.4

SUP 4.3.3 R allows but does not require the FSA to appoint an actuary if the firm has failed to do so within the 28 day period. When it considers whether to use this power, the FSA will take into account the likely delay until the firm can make an appointment and the urgency of any pending duties of the actuary.

31/12/2004

SUP 4.3.5

The FSA will not normally seek to appoint an actuary under SUP 4.3.3 R if a notification under SUP 10 ( Approved persons) has been received from the firm in relation to a proposed appointment of an actuary under SUP 4.3.1 R, and that application is still being considered.

31/12/2004

SUP 4.3.6

A firm must comply with and is bound by the terms on which an actuary has been appointed by the FSA under SUP 4.3.3 R.

31/12/2004

SUP 4.3.7

If the FSA appoints an actuary under SUP 4.3.3 R, he will not be an approved person (not being appointed under SUP 4.3.1 R). However, the firm is still under an obligation to appoint an actuary under SUP 4.3.1 R and will need to seek prior approval of that person (even if the individual it proposes to appoint is the person who has been appointed by the FSA under SUP 4.3.3 R).

31/12/2004

Actuaries' qualifications

SUP 4.3.8

The FSA is concerned to ensure that every actuary appointed by a firm under this section has the necessary skill and experience to provide the firm with appropriate actuarial advice. SUP 4.3.9 R to SUP 4.3.10 G set out the FSA's rules and guidance aimed at achieving this.

31/12/2004

SUP 4.3.9

Before a firm applies for approval of the person it proposes to appoint as an actuary under SUP 4.3.1 R, it must take reasonable steps to ensure that the actuary:

(1) has the required skill and experience to perform his functions under the regulatory system; and

(2) is a Fellow of the Institute of Actuaries or of the Faculty of Actuaries.

31/12/2004

SUP 4.3.10

To comply with SUP 4.3.9 R and Principle 3, before an actuary takes up his appointment the firm should ensure that the actuary:

(1) has skills and experience appropriate to the nature, scale and complexity of the firm's business and the requirements and standards under the regulatory system to which it is subject; and

(2) has adequate qualifications and experience, which includes holding an appropriate practising certificate under the rules of the Institute of Actuaries or the Faculty of Actuaries;

and seek confirmation of these from the actuary, or the actuary's current and previous employers, as appropriate.

31/12/2004

Disqualified actuaries

SUP 4.3.11

A firm must not appoint under SUP 4.3.1 R an actuary who is disqualified by the FSA under section 345 of the Act (Disqualification) from acting as an actuary either for that firm or for a relevant class of firm.

31/12/2004

SUP 4.3.12

If it appears to the FSA that an actuary has failed to comply with a duty imposed on him under the Act, it may disqualify him under section 345 of the Act. For more detail about what happens when the disqualification of an actuary is being considered or put into effect, see ENF 17 (Disqualification of auditors and actuaries). A list of actuaries who are disqualified by the FSA may be found on the FSA website (www.fsa.gov.uk).

31/12/2004

SUP 4.3.12A

A firm must take reasonable steps to ensure that an actuary who is to be, or has been, appointed under SUP 4.3.1 R:

(1) does not perform the function of chairman or chief executive of the firm, or does not, if he is to perform the with-profits actuary function, become a member of the firm's governing body; and

(2) does not perform any other function on behalf of the firm which could give rise to a significant conflict of interest.

31/12/2004

SUP 4.3.12B

Both the actuarial function and the with-profits actuary function may be performed by employees of the firm or by external consultants, and performing other functions on behalf of the firm will not necessarily give rise to a significant conflict of interest. However, being a director, or a senior manager responsible, say, for sales or marketing in a firm (or for finance in a proprietary firm), is likely to give rise to a significant conflict of interest for an actuary performing the with-profits actuary function. He nevertheless retains direct access to the firm's governing body under SUP 4.3.17 R (2).

31/12/2004

The actuarial function

SUP 4.3.13

An actuary appointed to perform the actuarial function must, in respect of those classes of the firm's long-term insurance business which are covered by his appointment:

(1) advise the firm's management, at the level of seniority that is reasonably appropriate, on the risks the firm runs in so far as they may have a material impact on the firm's ability to meet liabilities to policyholders in respect of long-term insurance contracts as they fall due and on the capital needed to support the business, including regulatory capital requirements;
(2) monitor those risks and inform the firm's management, at the level of seniority that is reasonably appropriate, if he has any material concerns or good reason to believe that the firm:

(a) is not meeting liabilities to policyholders under long-term insurance contracts as they fall due, or may not be doing so, or might not have done so, or might, in reasonably foreseeable circumstances, not do so;
(b) is, or may be, effecting new long-term insurance contracts on terms under which the resulting income earned is insufficient, under reasonable actuarial methods and assumptions, and taking into account the other financial resources that are available for the purpose, to enable the firm to meet its liabilities to policyholders as they fall due (including reasonable bonus expectations);
(c) does not, or may not, have sufficient financial resources to meet liabilities to policyholders as they fall due (including reasonable bonus expectations) and the capital needed to support the business, including regulatory capital requirements or, if the firm currently has sufficient resources, might, in reasonably foreseeable circumstances, not continue to have them;

(3) advise the firm's governing body on the methods and assumptions to be used for the investigations required by IPRU(INS) 9.4R or IPRU(FSOC) 5.1R and the calculation of the with-profits insurance capital component under PRU 7.4 as applicable;
(4) perform those investigations and calculations in (3), in accordance with the methods and assumptions determined by the firm's governing body;
(5) report to the firm's governing body on the results of those investigations and calculations in (3); and
(6) in the case of a friendly society to which this section applies, perform the functions of the appropriate actuary under section 87 (Actuary's report as to margin of solvency) of the Friendly Societies Act 1992.

31/12/2004

SUP 4.3.14

IPRU(INS) 9.4R and IPRU(FSOC) 5.1R require firms to which this section applies to cause an investigation to be made at least yearly by the actuary or actuaries appointed to perform the actuarial function, and to report on the result of that investigation. PRU 7.4 requires realistic basis life firms to calculate the with-profits insurance component as part of their capital resources requirements.The firm is responsible for the methods and assumptions used to determine the liabilities attributable to its long-term insurance business. The obligation on friendly societies to obtain a report from the 'appropriate actuary' under section 87 of the Friendly Societies Act 1992 applies to a friendly society which is to receive a transfer of engagements under section 86 (transfer of engagements to or by a friendly society). The 'appropriate actuary' in this context is the actuary appointed to perform the actuarial function, rather than the appropriate actuary under SUP 4.4 (Appropriate actuaries).

31/12/2004

SUP 4.3.15

SUP 4.3.13 R is not intended to be exhaustive of the professional advice that a firm should take whether from an actuary appointed under this chapter or from any other actuary acting for the firm. Firms should consider what systems and controls are needed to ensure that they obtain appropriate professional advice on financial and risk analysis; for example:

(1) risk identification, quantification and monitoring;

(2) stress and scenario testing;

(3) ongoing financial conditions;

(4) financial projections for business planning;

(5) investment strategy and asset-liability matching;

(6) individual capital assessment;

(7) pricing of business, including unit pricing;

(8) variation of any charges for benefits or expenses;

(9) discretionary surrender charges; and

(10) adequacy of reinsurance protection.

31/12/2004

The with-profits actuary function

SUP 4.3.16A

An actuary appointed to perform the with-profits actuary function must:

(1) advise the firm's management, at the level of seniority that is reasonably appropriate, on key aspects of the discretion to be exercised affecting those classes of the with-profits business of the firm in respect of which he has been appointed;
(2) where the firm is a realistic basis life firm advise the firm's governing body as to whether the assumptions used to calculate the with-profits insurance component under PRU 7.4 are consistent with the firm's PPFM in respect of those classes of the firm's with-profits business;
(3) at least once a year, report to the firm's governing body on key aspects (including those aspects of the firm's application of its Principles and Practices of Financial Management on which the advice described in (1) has been given) of the discretion exercised in respect of the period covered by his report affecting those classes of with-profits business of the firm;
(4) in respect of each financial year, make a written report addressed to the relevant classes of the firm's with-profits policyholders, to accompany the firm's annual report under COB 6.11.9 R, as to whether, in his opinion and based on the information and explanations provided to him by the firm, and taking into account where relevant the rules and guidance in COB 6.12, the annual report and the discretion exercised by the firm in respect of the period covered by the report may be regarded as taking, or having taken, the interests of the relevant classes of the firm's with-profits policyholders into account in a reasonable and proportionate manner;
(5) request from the firm such information and explanations as he reasonably considers necessary to enable him properly to perform the duties in (1) to (4);
(6) advise the firm as to the data and systems that he reasonably considers necessary to be kept and maintained to provide the duties in (5); and
(7) in the case of a friendly society to which this section applies, perform the function of appropriate actuary under section 12 (Reinsurance) of the Friendly Societies Act 1992 or section 23A (Reinsurance) of the Friendly Societies Act 1974 as applicable, in respect of those classes of its with-profits business covered by his appointment.

01/10/2005

SUP 4.3.16B

In advising or reporting on the exercise of discretion, an actuary performing the with-profits actuary function should cover the implications for the fair treatment of the relevant classes of the firm's with-profits policyholders. His opinion on any communication or report to them should also take into account their information needs and the extent to which the communication or report may be regarded as clear, fair and not misleading. Aspects of the business that should normally be included are:

(1) bonus rates to be applied to policies at maturity or on the death of a policyholder, or when calculating the annual bonus;

(2) investment policy in the light of product descriptions disclosed to customers;

(3) surrender value methodology (including market value adjusters);

(4) new business plans and premium rates;

(5) allocation of expenses to with-profits business;

(6) investment fees to be charged to with-profits business;

(7) changes to the Principles and Practices of Financial Management; and

(8) communications with policyholders or potential policyholders on the issues in (1) to (7).

01/10/2005

SUP 4.3.16C

The reports in SUP 4.3.16AR (3)and SUP 4.3.16AR (4)should be proportionate to the nature of the with-profits business. For smaller firms with fewer products, the extent of reporting would be proportionately less.

01/10/2005

SUP 4.3.16D

Firms should normally obtain advice, from the actuary appointed to perform the with-profits actuary function in respect of the affected class or classes of with-profits business, whenever they are preparing to make key decisions based on the exercise of discretion affecting their with-profits business. Firms should also have risk management processes in place to ensure that all relevant matters are referred to the actuary for advice.

31/12/2004

SUP 4.3.17

A firm must require and allow any actuary appointed to perform the with-profits actuary function to perform his duties and must:

(1) keep him informed of the firm's business and other plans (including, where relevant, those of any related firm, to the extent it is aware of these);

(2) provide him with sufficient resources (including his own time and access to the time of others);

(3) hold such data and establish such systems as he reasonably requires;

(4) request his advice about the likely effect of material changes in the firm's business plans, practices or other circumstances on the fair treatment of the relevant classes of the firm's with-profits policyholders; and

(5) pay due regard to his advice, whether provided in response to a request under (4) or on the actuary's own initiative; this will include, if he requests it, allowing him to present his advice directly to the firm's governing body (that is, the board of directors or, for a friendly society, the committee of management).

31/12/2004

SUP 4.3.18

A firm's duty to keep an actuary appointed to perform the with-profits actuary function informed includes providing relevant information, even where the actuary does not ask for it. The firm needs to appreciate that the actuary may be unaware of certain business developments and so unable to request relevant information.

31/12/2004

SUP 4.4

Appropriate actuaries

01/12/2004

Appointment of an appropriate actuary

SUP 4.4.1

A firm to which this section applies (see SUP 4.1) and required by IPRU(FSOC) 5.2(1) to ensure that an investigation is carried out must:

(1) appoint an actuary (the "appropriate actuary") to carry out the triennial investigation and prepare an abstract of the report as required by IPRU(FSOC) 5.2(2) and provide the interim certificate or statement as required by IPRU(FSOC) 5.2(3); and

(2) appoint a replacement for that actuary if he ceases to hold office before he has carried out the duty described in (1).

21/06/2001

Appropriate actuaries' qualifications

SUP 4.4.2

Before a friendly society appoints an appropriate actuary, it must take reasonable steps to ensure that the actuary is a Fellow of the Institute of Actuaries or of the Faculty of Actuaries.

21/06/2001

SUP 4.4.3

An appropriate actuary should have skills and experience appropriate to the nature, scale and complexity of the firm's business and the requirements and standards under the regulatory system to which it is subject. In complying with Principle 3, a firm should have regard to whether its proposed appropriate actuary has adequate qualifications and experience, and seek confirmation of this from the actuary, or the actuary's current and previous employers, as appropriate.

21/06/2001

SUP 4.4.4

A firm must not appoint as appropriate actuary an actuary who has been disqualified by the FSA under section 345 of the Act (Disqualification) from acting as an actuary either for that firm or for a relevant class of firm.

21/06/2001

SUP 4.4.5

If it appears to the FSA that an appropriate actuary has failed to comply with a duty imposed on him under the Act, it may disqualify him under section 345 of the Act. For more detail about what happens when the disqualification of an actuary is being considered or put into effect, see ENF 17 (Disqualification of auditors and actuaries). A list of actuaries who have been disqualified by the FSA may be found on the FSA website (www.fsa.gov.uk).

31/12/2004

Specific duties of the appropriate actuary

SUP 4.4.6

An appropriate actuary must carry out the triennial investigation and prepare an abstract of the report as required by IPRU(FSOC) 5.2(2) and provide the interim certificate or statement as required by IPRU(FSOC) 5.2(3).

31/12/2004

SUP 4.5

Provisions applicable to all actuaries

31/12/2004

Objectivity

SUP 4.5.1

An actuary appointed under this chapter must be objective in performing his duties.

31/12/2004

SUP 4.5.2

Objectivity requires the actuary to perform his duties in such a manner that he can have an honest belief in his work and does not compromise the quality of his work or his judgment. An actuary should not allow himself to be placed in situations where he feels unable to make objective professional judgments.

31/12/2004

SUP 4.5.3

An actuary appointed under this chapter must take reasonable steps to satisfy himself that he is free from bias, or from any conflict of interest from which bias may reasonably be inferred. He must take appropriate action where this is not the case.

31/12/2004

SUP 4.5.4

The appropriate action may include asking the firm's governing body to re-assign temporarily some or all of his duties to another competent actuary. Where this is insufficient, the actuary should resign his office.

31/12/2004

SUP 4.5.5

If the actuary is an employee of the firm, the ordinary incentives of employment, including profit-related pay, share options or other financial interests in the firm or any associate, give rise to a conflict of interest only where they are disproportionate, or exceptional, relative to those of other employees of equivalent seniority.

31/12/2004

SUP 4.5.6

The guidance and professional conduct standards in current issue from the Institute of Actuaries and the Faculty of Actuaries are relevant to compliance with SUP 4.5.1 R and SUP 4.5.3 R.

31/12/2004

Actuaries' statutory duty to report

SUP 4.5.7

Actuaries appointed under this chapter are subject to regulations made by the Treasury under section 342(5) and 343(5) of the Act (Information given by auditor or actuary to the Authority). These regulations oblige actuaries to report certain matters to the FSA. Sections 342(3) and 343(3) of the Act provide that an actuary does not contravene any duty by giving information or expressing an opinion to the FSA, if he is acting in good faith and he reasonably believes that the information or opinion is relevant to any functions of the FSA. These provisions continue to have effect after the end of the actuary's term of appointment. In relation to Lloyd's, an effect of the insurance market direction set out at SUP 3.1.13 D is that sections 342(5) and 343(5) of the Act (Information given by auditor or actuary to the FSA) apply also to actuaries who are appointed to evaluate the long-term insurance business of a syndicate.

01/01/2005

Termination of term of office

SUP 4.5.8

SUP 4.5.9 R to SUP 4.5.11 G apply to a person who is or has been an actuary appointed under this chapter.

31/12/2004

SUP 4.5.9

An actuary appointed under this chapter must notify the FSA without delay if he:

(1) is removed from office by a firm; or

(2) resigns before his term of office expires; or

(3) is not reappointed by a firm.

31/12/2004

SUP 4.5.10

An actuary who has ceased to be appointed under this chapter, or who has been formally notified that he will cease to be so appointed, must notify the FSA without delay:

(1) of any matter connected with the cessation which he thinks ought to be drawn to the FSA's attention; or

(2) that there is no such matter.

31/12/2004

SUP 4.5.11

When an actuary appointed under SUP 4.3.1 R ceases to hold office, he ceases to perform a controlled function. A firm is therefore required under SUP 10.13.6 R to tell the FSA within seven business days of its actuary ceasing to hold office and to complete a withdrawal form (Form C, SUP 10 Annex 6 R ). Note also the requirement of SUP 10.13.7 R in relation to qualified withdrawals.

31/12/2004

Rights and duties

SUP 4.5.12

Section 341 of the Act (Access to books etc.) provides that an actuary appointed under or as a result of the Act:

(1) has a right of access at all times to the firm's books, accounts and vouchers; and

(2) is entitled to require from the firm's officers such information and explanation as he reasonably considers necessary to perform his duties as actuary.

31/12/2004

SUP 4.5.13

When carrying out his duties, an actuary appointed under this chapter must pay due regard to generally accepted actuarial practice.

31/12/2004

SUP 4.5.14

The standards and guidance issued from time to time by the Institute of Actuariesandthe Faculty of Actuaries are important sources of generally accepted actuarial practice.

31/12/2004

SUP 4.6

Lloyd's

01/01/2005

Appointment of the Lloyd's actuary and syndicate actuaries

SUP 4.6.1

The Society must:

(1) appoint an actuary to perform the Lloyd's actuaryfunction;

(2) notify the FSA, without delay, when it is aware that a vacancy in the office of Lloyd's actuary will arise or has arisen, giving the reason for the vacancy;

(3) appoint an actuary to fill any vacancy in the office of Lloyd's actuary that has arisen; and

(4) ensure that the replacement actuary can take up office at the time the vacancy arises or as soon as reasonably practicable after that.

01/01/2005

SUP 4.6.2

The functions performed by the actuary appointed as the Lloyd's actuary under SUP 4.6.1 R are specified as controlled functions in SUP 10 (Approved persons). As a result, an application must be made to the FSA under section 60 of the Act (Applications for approval) for approval of the person proposing to take up such an appointment. Section 61(3) of the Act (Determination of applications) gives the FSA three months to grant its approval or give a warning notice that it proposes to refuse the application. An actuary should not be appointed until the FSA has approved the actuary. In order to comply with SUP 4.6.1 R, the Society should ensure it applies to the FSA as soon as practicable before the date when it needs the actuary to take office. The FSA will need time to consider the application before deciding whether to grant approval.

01/01/2005

Qualifications

SUP 4.6.3

Before the Society applies for approval of its proposed appointment of the Lloyd's actuary under SUP 4.6.1 R, it must take reasonable steps to ensure that the actuary:

(1) has the required skill and experience to perform his functions under the regulatory system; and

(2) is a Fellow of the Institute of Actuaries or of the Faculty of Actuaries.

01/01/2005

SUP 4.6.4

To comply with SUP 4.6.3 R and Principle 3, before the Lloyd's actuary takes up his appointment the Society should ensure that the actuary:

(1) has skills and experience appropriate to the nature, scale and complexity of the Society's business and the requirements and standards under the regulatory system to which it is subject; and

(2) has adequate qualifications and experience, which includes holding an appropriate practising certificate under the rules of the Institute of Actuaries or the Faculty of Actuaries;

and seek confirmation of these from the actuary, or the actuary's current and previous employers, as appropriate.

01/01/2005

Disqualified actuaries

SUP 4.6.5

The Society must not appoint under SUP 4.6.1 R as Lloyd's actuary an actuary who is disqualified by the FSA under section 345 of the Act (Disqualification) from acting:

(1) as an actuary for the Society; or

(2) as a syndicate actuary; or

(3) as an actuary for any other relevant class of firm.

01/01/2005

SUP 4.6.6

If it appears to the FSA that an actuary has failed to comply with a duty imposed on him under the Act, it may disqualify him under section 345 of the Act. For more detail about what happens when the disqualification of an actuary is being considered or put into effect, see ENF 17 . A list of actuaries who are disqualified by the FSAmay be found on the FSA website.

01/01/2005

Conflicts of interest

SUP 4.6.7

The Society must take reasonable steps to ensure that an actuary who is to be, or has been, appointed under SUP 4.6.1 R:

(1) does not perform the function of chairman or chief executive of the Society; and

(2) does not perform any other function on behalf of the Society which could give rise to a significant conflict of interest.

01/01/2005

The Lloyd's actuary function

SUP 4.6.8

An actuary who has been appointed to perform the Lloyd's actuaryfunction must:

(1) prepare the statement required under LLD 15.9.1 R (2) to be annexed to the Lloyd's Return; and

(2) take reasonable steps to ensure that the general insurance business technical provisions for each syndicate year have been reviewed by the syndicate actuary and that an appropriate opinion has been obtained under SUP 4.6.15 R; and

(3) where a syndicate actuary's opinion has not been provided, sets appropriate technical provisions and, within six months of the end of the financial year, submits a report to the FSA on the setting of those technical provisions.

01/01/2005

Appointment of syndicate actuaries

SUP 4.6.9

Each managing agent must, in respect of each syndicate it manages:

(1) appoint an actuary (the "syndicate actuary") to carry out the duties described in SUP 4.6.15 R or SUP 4.6.16 R; and

(2) appoint a replacement for that actuary if he ceases to hold office before he has carried out the duties described in SUP 4.6.15 R or SUP 4.6.16 R; and

(3) ensure that the replacement syndicate actuary can take up office at the time the vacancy arises or as soon as reasonably practicable after that.

01/01/2005

SUP 4.6.10

(1) The insurance market direction and guidance set out in SUP 3.1.4 G to SUP 3.1.15 G is relevant to actuaries appointed to report on the insurance business of members.

(2) References in SUP 4, as applied by SUP 4.1.3 R, to a firm include, where appropriate:

(a) a managing agent; and

(b) one or more member carrying on insurance business at Lloyd's policy through a syndicate;

and references to an actuary of a firm should be read accordingly.

01/01/2005

Syndicate actuaries' qualifications

SUP 4.6.11

Before a managing agent appoints a syndicate actuary, it must take reasonable steps to ensure that the syndicate actuary:

(1) has the required skill and experience to perform his duties; and

(2) is a fellow of an actuarial body or (except for a syndicate actuary of a long-term insurance business syndicate) is a fellow of the Casualty Actuarial Society who is a member of an actuarial body.

01/01/2005

SUP 4.6.12

To comply with SUP 4.6.11 R and Principle 3, before a syndicate actuary takes up his appointment a managing agent should ensure that the syndicate actuary:

(1) has skills and experience appropriate to the nature, scale and complexity of a syndicate's business and the requirements and standards under the regulatory system applicable to the activities of managing agents in relation to each syndicate which they manage; and

(2) has adequate qualifications and experience, which includes holding an appropriate practising certificate under the rules of the Institute of Actuaries or the Faculty of Actuaries;

and seeks confirmation of these from the syndicate actuary, or the syndicate actuary's current and previous employers, as appropriate.

01/01/2005

Disqualified actuaries

SUP 4.6.13

A managing agent must not appoint under SUP 4.6.9 R as syndicate actuary an actuary who is disqualified by the FSA under section 345 of the Act (Disqualification) from acting:

(1) as a syndicate actuary; or

(2) as a Lloyd's actuary; or

(3) as an actuary for a relevant class of firm.

01/01/2005

SUP 4.6.14

If it appears to the FSA that an actuary has failed to comply with a duty imposed on him under the Act, it may disqualify him under section 345 of the Act. For more detail about what happens when the disqualification of an actuary is being considered or put into effect, see ENF 17 . A list of actuaries who are disqualified by the FSAmay be found on the FSA website.

01/01/2005

Duties of syndicate actuaries

SUP 4.6.15

The syndicate actuary of a long-term insurance business syndicate must:

(1) make an investigation at the end of each financial year into the financial condition of the business carried on through each syndicate year (other than a closed year);

(2) make an abstract of his report of the investigation; and

(3) prepare the certificate required under LLD 15.9.1 R (3) to be annexed to the Lloyd's Return.

01/01/2005

SUP 4.6.16

The syndicate actuary of a general insurance business syndicate must:

(1) review the technical provisions (both gross and net of reinsurance recoveries) of each syndicate year (other than a closed year); and

(2) provide his opinion confirming that the technical provisions for each syndicate year are no less prudent than his best estimate of the amounts required.

01/01/2005

SUP 4.6.17

If a managing agent becomes aware that the syndicate actuary of a general insurance business syndicate will or may be unable to produce an unqualified opinion under SUP 4.6.16 R, the managing agent must promptly inform the FSA that this is the case.

01/01/2005

SUP 4.6.18

In carrying out his duties a syndicate actuary must pay due regard to generally accepted actuarial best practice.

01/01/2005

SUP 4.6.19

The standards and guidance issued by the Institute of Actuaries and the Faculty of Actuaries are important sources of actuarial best practice.

01/01/2005