Regulators identify risk hotspots for actuaries from Brexit to pensions

The Joint Forum on Actuarial Regulation (JFAR) is warning that poorly funded defined benefit pension schemes, the aging demographic and rising mortality rates, and post-Brexit regulatory concerns are key risks actuaries need to take into account when assessing risk probabilities

The Risk Perspective report identifies nine hotspots where there is a greater likelihood of increased risk to the public interest where actuarial work is concerned, particularly in the insurance sector. 

These include political and legislative risk, market performance and uncertainty, climate-related risk and technological change.  The JFAR also recognises common themes that cut across the hotspots such as professionalism, intergenerational fairness and Brexit.

For each hotspot, the risk is described in generic terms and the key risk drivers affecting each topic are detailed. It also identifies possible responses to particular risks for actuaries or users of actuarial work.

The key risk hotspots are:

  • political and legislative risk;
  • regulatory change;
  • market performance and uncertainty;
  • climate-related risk;
  • financial security;
  • defined benefit pension scheme management;
  • technological change – automation and digitisation, Big Data, artificial intelligence and cyber risk;
  • terrorism and cyber crime; and
  • mortality.

The report is designed to help actuaries focus on the different types of risk so that they can improve the quality of their work. It explores the impact on actuarial work of people living longer, rising environmental concerns and technology advancing at an unprecedented pace. 

The risk perspective was developed using a new actuarial risk identification architecture (ARIA). This enables JFAR to identify and review the macro environmental drivers, risks inherent in actuarial work and the market characteristics which currently lead to an increase in risk.

JFAR is calling on key stakeholders to give feedback on the content of the document and the nature of the risks to ensure that all bases are covered. It will hold stakeholder outreach events during 2018. Email feedback to RiskPerspective@frc.org.uk

Joint Forum on Actuarial Regulation (JFAR) Risk Perspective: 2017 Update January 2018, released 8 February 2018

Report by Sara White

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