Actuaries Abroad Lloyd’s Reserve Opinions

by Catherine Cresswell

Lloyd’s is complicated, as everyone will know who has tried to understand it. The regulation of Lloyd’s is even more complicated. Rather than reporting to one regulator, Lloyd’s entities report to several. The prime regulator of Lloyd’s members, syndicates, and managing agents is the regulatory department of the Corporation of Lloyd’s. This is supplemented by solvency monitoring on a name-by-name basis and at a global level, which is conducted by the Insurance Division of the U.K. Treasury. Reports must also be provided on U.S. surplus lines business to the International Insurers’ Department of the NAIC and on U.S. trust funds to the New York Insurance Department. Not surprisingly, this plethora of reporting requirements has led to a clutch of different reserve opinions on syndicate liabilities and several guidance notes (practice standards) for actuaries giving these opinions.

The opinions and relevant guidance are as follows:

Professional guidance pertaining to giving these opinions is set out in GN20, GN33, and other guidance notes issued by the Faculty & Institute of Actuaries (such matters are now always dealt with on a joint basis by the two U.K. actuarial professional bodies-the Institute of Actuaries based in London and the Faculty of Actuaries based in Edinburgh).

Fellows of the CAS are expressly permitted to sign GN20 opinions, so long as they are also Affiliate members of the Institute of Actuaries. This requirement that they be members of the Institute ensures that they are bound by U.K. professional standards, practice standards (for example GN20 and GN33) and subject to the U.K. profession’s disciplinary procedures.

While many of the professional standards may be relevant to opinions under GN20 or GN33, the standards explicitly require that an actuary must "consider carefully whether his or her experience of the business procedures of Lloyd’s and of estimating reserves for types of business similar to that underwritten by the syndicate is sufficient to justify undertaking the assignment."

Much London market business is arcane and there are differences in accounting practices between the London market and the U.S.; indeed there may well be some accounting differences between syndicates.

Becoming an Affiliate of the Institute is in any case to be recommended if an actuary who qualified other than through the Institute or Faculty is working in the U.K. One simply applies to Georgina Ivers at the Institute of Actuaries [fax (44) 171 405 2482, telephone (44) 171 242 0106, E-mail georgini@actuaries.org.uk], with details of one’s actuarial qualifications. An FCAS is automatically entitled to become an Affiliate Member. On admission one is entitled to attend Institute meetings and receive Institute publications, papers, and exposure drafts. Affiliate membership costs $200 a year. Professional subscriptions are normally tax deductible in the U.K.