SUP 4.3 Appointment of actuaries1

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

1. (1)

   appoint one or more actuaries to perform:1

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   1. (a)

      the actuarial function (see SUP 4.3.13 R) in respect of all classes of its long-term insurance business; and1

   2. (b)

      the with-profits actuary function (see SUP 4.3.16A R) in respect of all classes of its with-profits business (if any);1

2. (2)

   notify the FSA, without delay, when it is aware that a vacancy in the office of any such actuary1 will arise or has arisen, giving the reason for the vacancy;

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3. (3)

   appoint an actuary to fill any such1 vacancy that has arisen; and

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4. (4)

   ensure a 1replacement actuary can take up office at the time the vacancy arises or as soon as is reasonably practicable after that.

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If a firm, which is required to appoint one or more actuaries1 under SUP 4.3.1 R, fails to do so within 28 days of a vacancy arising, the FSA may appoint one or more actuaries1 to perform any function corresponding to the actuarial function or the with-profits actuary function1 on the following terms:

1. (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. (2)

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

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.

Before a firm applies for approval of the person it proposes to appoint as an actuary under SUP 4.3.1 R1, it must take reasonable steps to ensure that the actuary:

1. (1)

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

2. (2)

   is a Fellow of the Institute of Actuaries or of the Faculty of Actuaries.

A firm must not appoint under SUP 4.3.1 R1 or 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.

1A 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. (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. (2)

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

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 appointment1:

1. (1)

   advise the firm's management, at the level of seniority that is reasonably appropriate, on1 the risks the firm runs in1 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;1

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2. (2)

   monitor those risks and 1inform 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 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;

   2. (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);1

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   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 requirements1 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 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;1

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4. (4)

   perform those investigations and calculations in (3), in accordance with the methods and assumptions determined by the firm's governing body;1

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5. (5)

   report to the firm's governing body on the results of those investigations and calculations in (3); and1

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6. (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 1992.1

1An 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 business of the firm in respect of which he has been appointed;

2. (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. (3)

   at least once a year, in respect of each financial year commencing on or after 1 January 2005, 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. (4)

   in respect of each financial year commencing on or after 1 January 2005, 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,

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   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;1

5. (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. (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. (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.

A firm must require and allow any actuary appointed to perform the with-profits actuary function1 to perform his duties and must1:

1. (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. (2)

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

3. (3)

   hold such data and establish such systems as he reasonably requires;

4. (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 policyholders1; and

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5. (5)

   pay due regard to his advice, whether provided in response to a request under (4) or on the actuary's1 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).

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