The Reserve Bank has released a number of recommendations in a comprehensive review of the Appointed Actuary role.
Appointed Actuaries have a critical legislated role in the insurance industry to measure and report on material risks
that can threaten the financial condition and solvency of an insurer. Importantly, the role also entails providing
impartial advice to an insurer’s board of directors and senior management to assist with sound decision making. This
support can greatly strengthen an insurer’s risk and capital management and lead to the increased security of
policyholders.
The review, conducted by the Reserve Bank’s Industry Insights and Thematics team, was launched to better understand how
the Appointed Actuary role works in practice for insurers, actuaries and the Reserve Bank, and to identify potential
areas for improvement to make the role and regime more effective.
“The review concludes the regime and appointed actuary role are largely effective, but improvements can be made across
the board – with the actuaries themselves, insurers and at the Reserve Bank. These improvements are important, and we
will be working closely with the industry to support necessary changes,” Deputy Governor and General Manager for
Financial Stability Geoff Bascand says.
Appointed Actuaries all had good practices in place to keep their knowledge up to date and the Financial Condition
Reports they prepare are highly valued by insurers, the report notes.
Key findings include the need for clarity and guidance around the Reserve Bank’s expectations of the Appointed Actuary
role, and the risk that the impartiality of the Appointed Actuary could be adversely impacted by factors such as the
influence of senior management and reporting lines.
“Many of the recommendations highlighted are good practice that can be implemented by insurers and appointed actuaries
with little additional resource and in many respects emphasise matters that we think should already be practised, such
as implementing processes to follow up on recommendations made by Appointed Actuaries in their Financial Condition
Report,” Mr Bascand says.
“The report also recommends the Appointed Actuary considers policyholder interests and communicates these when relevant
in providing advice.”
Recommendations identified in the report for strengthening the Reserve Bank’s oversight role have been accepted by the
Bank, Mr Bascand says.
“The report also identified the need for increased engagement between the Reserve Bank and Appointed Actuaries. We have
taken this on board and regular, one-on-one meetings will be held between the Reserve Bank and the Appointed Actuary of
Designated insurers, without the insurer’s management or board members present. At the end of their employment,
Appointed Actuaries will also be expected to attend an exit interview with the Reserve Bank to facilitate open, free and
frank confidential discussions.
“We have outlined our expectations in a policy note which will be followed up with formal guidance. A number of
recommended improvements require legislative change and we will be consulting on these during the re-launch of the
Insurance (Prudential Supervision) Act 2010 (IPSA) review which was put on hold in line with the regulatory relief
offered by the Reserve Bank in response to the COVID-19 pandemic.”
Key areas for improvement identified include:processes for appointments, absences, and reviews to continue with or replace the Appointed Actuarypreparedness for the Appointed Actuary’s involvement in a crisisidentifying and managing conflicts of interestclarity of delegationsprocesses for following up recommendations in the Financial Condition Reportsengagement between insurers’ boards and Appointed Actuariesengagement between the Reserve Bank and Appointed Actuariesguidance around the Reserve Bank’s expectations of the Appointed Actuary role, including explicit expectations regarding
their independence and impartiality