How can you get more from your Actuarial Function Reports?

We interviewed 25 leading general insurers to understand how general insurance boards across the market work with their actuaries.

A key finding was that boards value actuaries’ opinions highly, but the burden of meeting regulatory requirements means that some actuaries don’t always have sufficient time to add value.

The Actuarial Function Report (AFR) was repeatedly given as an example where the regulatory requirement of the report made it harder to communicate effectively with the board and provide timely business insights.

Here are some ideas of how we can make AFR more than just a regulatory compliance piece of work.

Timing of analysis

A key improvement is to make sure that each area of the AFR is completed at a time of year where it will add value to the decisions being made.

For example, the Underwriting Opinion should be presented to the Board while the business plan is still live and where any key challenges from the Actuarial Function can still be factored into the plan by the Board.

Another example is the Actuarial Function’s involvement in the Own Risk and Solvency Assessment (ORSA). Before the Board signs off the ORSA, they should have the benefit of input and challenge from the Actuarial Function.

These changes mean that the AFR is a not retrospective review of decisions already made by the Board, but rather a record of how the Actuarial Function actively participated in the work leading up to those decisions.

Report structure

Some board members noted that changes to the presentation of the AFR could help improve their engagement with the report and its findings. Recognising that each board is different, a key action is to have a conversation with board members to find out how they would engage best with the results and keep this under regular review.

Here are a few tips to get you started:

• Putting the opinions and key recommendations on page 1. This is a simple change but will help boards focus on the purpose of the report.
• Some board members expressed a preference for a short report (approx. 10 pages) with signposting to appendices and other reports where the detail is presented.
• Make sure that, early in the report, you are answering these three key questions for the Board:
  • So What? What is the point of this advice for the board, what question are we trying to answer?
  • What if? What are the key assumptions and uncertainty around the results presented?
  • What next? What needs to happen next and what implications does this advice have on other areas?
• Make sure the opinions from the Actuarial Function are clear to avoid giving false confidence. For example, rather than saying “the firm has low exposure to anti-selection risk”, provide analysis to help quantify changes in business mix and to give a sense of whether anti-selection risk is increasing or decreasing. Boards told us that they value the opinions of the actuarial function, but those opinions need to be clearly presented.

If you want to learn more about how general insurance boards and actuaries work together, take a look at our interactive report ‘The Virtuous Cycle: How insurance actuaries and boards can work together more effectively’.