Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to a non-directive insurer.

1.2

Chapters 2 to 6 only apply to a long-term insurer which is not a non-directive friendly society.

1.3

Chapter 7 only applies to a non-directive friendly society other than:

1. (1) a partnership pension society; and
2. (2) a flat rate benefits business friendly society.

1.4

This Part applies to an actuary appointed under 2 or 7 or appointed under or as a result of a statutory provision other than in FSMA.

1.5

In this Part, the following definitions shall apply:

actuarial function

means the function of acting in the capacity of an actuary appointed by a firm under 2.1(1) to perform the duties set out in 5.

appropriate actuary

means an actuary appointed under 7.1

Chief Executive function

means the PRA controlled function CF3 in the table of PRA controlled functions in SUP 10B.4.3 R of the PRA Handbook, described more fully in SUP 10B.6.7 R of the PRA Handbook.

With-Profits Actuary function

means the function of acting in the capacity of an actuary appointed by a firm under 2.1(2) to perform the duties set out in 6.

2.1

A firm must appoint one or more actuaries to perform and be responsible for:

(1) the actuarial function in respect of all classes of its long-term insurance business; and

(2) the With-Profits Actuary function in respect of all classes of its with-profits insurance business (if any).

2.2

A firm must:

1. (1) when it becomes aware that a vacancy of an actuary required under 2.1 will arise or has arisen:
1. (a) notify the PRA; and
2. (b) give reasons for the vacancy,
2. without delay, using the form referred to in Notifications 10.3;
3. (2) appoint an actuary to fill any vacancy of an actuary required under 2.1;
4. (3) ensure that the replacement actuary can take up the vacant post at the time the vacancy arises or as soon as reasonably practicable after that; and
5. (4) when a new actuary is appointed:
1. (a) notify the PRA of that appointment; and
2. (b) advise the PRA of the name and business address of the actuary appointed and the date from which the appointment has effect,
6. using the form referred to in Notifications 10.3.

2.3

Where a firm fails to appoint an actuary under 2.1 within 28 days of a vacancy arising the PRA may appoint an actuary to perform either of the functions in 2.1(1) or (2) for that firm on the following terms:

1. (1) the actuary to be remunerated by the firm on the basis agreed between the actuary and firm or, in the absence of agreement, on a reasonable basis; and
2. (2) the actuary to perform the function required under 2.1 until he resigns or the firm appoints another actuary.

2.4

A firm must comply with and is bound by the terms on which an actuary has been appointed by the PRA.

2.5

Where the PRA appoints an actuary to perform either of the functions in 2.1(1) or (2) for a firm, the requirements under 2.1 to make appointments under that rule still apply to that firm.

3.1

Before a firm appoints an actuary under 2.1, it must take reasonable steps to ensure that the actuary has the required skill and experience to perform his functions under the regulatory system commensurate with the nature, scale and complexity of the firm's business and the requirements and standards under the regulatory system to which it is subject.

3.2

A firm must not appoint as actuary a person who is disqualified under Part XXII of FSMA from acting as an actuary either for that firm or for a relevant class of firm.

3.3

A firm must take reasonable steps to ensure that an actuary, which it is planning to appoint or has appointed, provides information to the PRA about the actuary’s qualifications, skills, experience and any other relevant matters in accordance with the reasonable requests of the PRA.

4.1

A firm must take reasonable steps to ensure that an actuary that it appoints:

1. (1) does not perform the Chief Executive function;
   
   
2. (2) does not, if he is to perform the With-Profits Actuary function, become a member of the firm's governing body; and
   
   
3. (3) does not perform any other function on behalf of the firm which could give rise to a significant conflict of interest.

5.1

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. (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 contracts of long-term insurance as they fall due and on the capital needed to support the business, including regulatory capital requirements;
2. (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:
1. (a) is not meeting liabilities to policyholders under contracts of long-term insurance 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;
2. (b) is, or may be, effecting new contracts of long-term insurance 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 amounts required to enable the firm to fulfil its regulatory duty to treat its customers fairly under any relevant provision in the FCA Handbook);
3. (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. (3) advise the firm's governing body on the methods and assumptions to be used for the investigation required by Insurance Company – Reporting 5.8 and 5.9;
4. (4) perform those investigations and calculations in (3), in accordance with the methods and assumptions determined by the firm's governing body;
5. (5) report to the firm's governing body on the results of the investigations and calculations in (3);
6. (6) in the case of a friendly society, perform the functions of the appropriate actuary under section 87 (Actuary's report as to margin of solvency) of the Friendly Societies Act 1992; and
7. (7) if applicable, be responsible for the actuarial function required by Governance 10.2.

6.1

An actuary appointed to perform the With-Profits Actuary function must:

1. (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 insurance business of the firm in respect of which he has been appointed;
2. (2) 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 PPFM 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 insurance business of the firm;
3. (3) request from the firm such information and explanations as he reasonably considers necessary to enable him properly to perform the duties in (1) and (2);
4. (4) advise the firm as to the data and systems that he reasonably considers necessary to be kept and maintained to provide the duties in (3); and
5. (5) in the case of a friendly society, 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 insurance business covered by his appointment.

7.1

A firm must:

1. (1) appoint an appropriate actuary to carry out the triennial investigation and prepare the return required by Friendly Society – Reporting 2.1 and 2.2 and provide the certificate or statement required by Friendly Society – Reporting 2.3; and
2. (2) appoint a replacement for that actuary if he ceases to hold office before he has carried out the duty described in (1).

7.2

A firm must not appoint as appropriate actuary a person who is disqualified under Part XXII of FSMA (Auditors and Actuaries) from acting as an actuary either for that firm or for a relevant class of firm.

8.1

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

8.2

An actuary appointed under this Part 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.

8.3

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

8.4

An appropriate actuary must carry out the triennial investigation and prepare the return required by Friendly Society – Reporting 2.1 and 2.2 and provide the certificate or statement required by Friendly Society – Reporting 2.3.

8.5

An actuary must notify the PRA without delay if the actuary:

(1) is removed from office by a firm;

(2) is formally notified of such removal from office;

(3) resigns before the term of office expires;

(4) is not re-appointed by a firm; or

(5) is disqualified from being the actuary of:

(a) any undertaking or particular class of undertaking; or

(b) any firm or particular class of firm.

8.6

In the circumstances set out in 8.5, the actuary must notify the PRA without delay:

1. (1) of any matter connected with the removal or ceasing of the office of actuary that the actuary thinks ought to be drawn to the PRA's attention; or
2. (2) that there is no such matter.