SUP 4.2 Purpose

Section 340 of the Act gives the PRA power to make rules requiring an authorised person, or an authorised person falling into a specified class, to appoint an actuary. The PRA has exercised its power to make such rules in PRA Rulebook: Solvency II firms: Actuaries; and PRA Rulebook: Non-Solvency II firms: Actuarial Requirements. The rule-making powers of the PRA and FCA under section 340 of the Act also extend to an actuary's duties.

This chapter defines the relationship between firms and their actuaries and clarifies the role which actuaries play in the appropriate regulator'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. (1)

   long-term insurers (other than certain friendly societies and Solvency II firms) 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. (2)

   other friendly societies (other than Solvency II firms) 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. (3)

   where Solvency II firms appoint, employ or use an actuary, certain appropriate safeguards are in place.

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. Solvency II firms are required to have an actuarial function. Solvency II firms are not required to appoint an external actuary to fulfil the actuarial function for the purposes of rule 6 of the PRA Rulebook: Solvency II firms: Conditions Governing Business, but they must do so if they do not have the internal capability (see PRA Rulebook: Solvency II Firms: Actuaries). Whoever has responsibility for the actuarial function (whether internal or external) will need to be approved by the PRA as a Chief Actuary. Solvency II firms carrying on with-profits business are required to appoint a qualified with-profits actuary (whether internal or external). Whoever has responsibility for advising the governing body of the firm on the exercise of discretion affecting the firm's with-profits business will need to be approved by the PRA as a With-Profits Actuary. 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).

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).

Actuaries act as a valuable source of information to the appropriate regulator in carrying out its functions. For example, in determining whether a firm satisfies the threshold conditions, the appropriate regulator has regard to whether the firm has appointed an actuary (or some other person with responsibility for the actuarial function required by rule 6 of the PRA Rulebook: Solvency II firms: Conditions Governing Business) with sufficient experience in the areas of business to be conducted by the firm.

In making appointments under this chapter and in allocating duties to actuaries, firms are reminded of their obligation under SYSC 2.1.1 R or rule 2.2(2) of the PRA Rulebook: Solvency II firms: Conditions Governing Business 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.