1. Introduction

2. What is a Conflict of Interest?

3. Identifying a Conflict of Interest

4. Managing and reconciling conflicts of interest

5. Further guidance and advice

Appendices

 

Back to the Code

1. Introduction 

1.1. Principle 3 on ‘Impartiality’ of the Actuaries’ Code (“the Code”) provides that:

“Members must ensure that their professional judgement is not compromised, and cannot reasonably be seen to be compromised, by bias, conflict of interest, or the undue influence of others.”

1.2. Because conflicts of interest are a particular threat to this ‘impartiality’ principle, the Code then adds the following amplifications:

1.3. Conflicts of interest can be complex and require use of professional judgement. This Guide is intended to assist Members with understanding their responsibilities in relation to conflicts of interest and to help with that exercise of professional judgement.

1.4. Ensuring that conflicts are (a) understood; (b) identified; and (c) reconciled or eliminated, is the key to meeting the requirements of the Code.

1.5. All Members have an individual responsibility to be familiar with their obligation to identify conflicts and to know what to do if they encounter one. This responsibility exists regardless of their particular role in the work or level of seniority, including actuarial students, more junior members of an actuarial team and those working as part of a multidisciplinary team.

1.6. There may also be practice-specific conflict of interest provisions for Members, such as any contained in the relevant professional standards [1]. Additionally, Members need to have regard to any relevant legal and regulatory requirements in the country in which they are practising [2].

1.7. If Members are unsure how to act at any stage, the IFoA encourages them to seek guidance from appropriate sources.  A note regarding further sources of advice can be found below at Section 5.


2. What is a conflict of interest?

2.1. ‘Conflicts of interest’ can arise in any situation where two or more separate parties are involved, and the interests of those parties differ.   As conflicts can be complex, it is not possible to give an exhaustive list.  However, common examples of situations where conflicts of interests can arise are where a Member’s professional responsibility to a user of their work conflicts or is seen to conflict with:

(a) the Member’s own interests (or those of close family) (“personal conflict”); or

(b) an interest of the Member’s employer, in situations where the employer is not also the Member’s client/user (“employer conflict”); or

(c) an interest of another client of the Member (“client conflict”).

2.2. Taking each of these in turn, some examples could be:

(a) A Member – or their friends or family – may have a financial interest in the outcome of a transaction that will be influenced by advice being given by the Member.  In addition to direct financial interests, relevant considerations may also include personal appointments or memberships or, in some circumstances, ethical values or beliefs which make it difficult for Members to act, and to be seen to act, in the interests of the user.

(b) Similarly, a Member’s employer might (even where it is not also the Member’s client/user) have a financial or other interest in the outcome of the Member’s work.  A conflict could therefore arise between their professional judgement in providing advice to a client/user and the commercial objectives of their employer.  Members might then be put under pressure, directly or indirectly, by their supervisor or other person within their organisation to act in a way which they would not otherwise judge to be in the interests of a client/user.

(c) Situations can also arise in which a Member has two separate clients whose interests come into conflict. The Member might then be tempted to act in the interests of one client, in a manner which works against the interests of the other client or user.

2.3. More examples of situations where there might be a possible conflict of interest are included at Appendix A.


3. Identifying a conflict of interest

3.1. The effective understanding and identification of conflicts of interest is key to their reconciliation. Amplification 3.1 of the Code provides that Members take reasonable steps to ensure they are aware of any interests that might create a conflict.

3.2. In order to identify conflicts it may be useful for Members to approach this in two steps:

(i) Establish what various interests are involved in the particular scenario – who do you work for? Who are the users for the piece of work? Do you have a personal interest in the matter? Does anyone else have an interest which I should take into account?

(ii) Assess whether the differing interests of relevant parties involved (including your own interests and those of the person you work for) might make it hard for you to continue to act without compromising your objectivity or your professional responsibility to the user (or any of the users) of your work. Or are the interests of parties other than the principal user so remote or generic that they will not compromise, or be seen to compromise, your professional judgement?

3.3. When establishing the various interested parties, Members need to be alert to the possibility that within one legal entity there are two separate bodies with divergent interests (for example, a finance committee and a remuneration committee), or one body with two different responsibilities (for example, the sponsoring employer of a pension scheme might also be the trustee or manager of that scheme). In such circumstances, a Member might conclude that there are two distinct ‘users’, giving rise to a possible conflict.

3.4. Taking ‘reasonable steps’ to identify potential conflicts would normally involve Members following any internal processes established for this purpose by their own organisation, and might typically include sending out a ‘conflict check’ email to appropriate staff in the organisation and/or to the relevant conflict committee, and/or a search of the organisation’s conflicts database. 

3.5. Arrangements implemented by a Member or their organisation for ensuring that conflicts of interest are effectively identified could include:

  • Regular training to ensure all employees are aware of their duties and can identify conflicts;
  • A practice of recording gifts and hospitality, ensuring that amounts are not out of line with any organisational policy and that the Member does not knowingly receive gifts or hospitality which could lead to an actual or perceived conflict of interest.

3.6. Members are required to respect confidentiality [3]. Therefore, before taking on any new engagement, Members are advised to consider whether they have an existing duty of confidentiality to any existing or former users, which would give rise to a conflict of interest with the proposed new engagement.

3.7. A note of some helpful questions for Members to consider when identifying conflicts is included at Appendix B.


4. Managing and reconciling conflicts of interest

4.1. Once a conflict of interest is identified, amplification 3.2 of the Code states that Members must not act if there is an unreconciled conflict of interest. This means that the conflict needs to be managed appropriately or the Member must decline or cease to act in the specific situation.

4.2. “Reconciliation” can be understood to mean carefully managing the conflict such that, within the scope of an engagement, the conflict does not have (and is not seen to have) any adverse effect on the work for the users

4.3. It is also necessary that Members are alert to situations where others perceive that there may be a conflict of interest or the possibility of a conflict of interest, even when an actual conflict of interest does not exist. In these situations it is still necessary for the perception of the conflict to be appropriately addressed in order for the Member to continue to act. 

4.4. Reconciling a conflict of interest will likely involve disclosing the existence of the conflict of interest to the user(s) concerned and explaining the relevant issues, risks and any constraints on the work in a manner so that the user understands them. However, Members also need to consider any underlying confidentiality obligations to other parties.

4.5. There may be internal guidance in Members’ organisations on how conflicts of interest are to be managed. Members need to satisfy themselves that such guidance is appropriate and sufficient, and if/where necessary supplement it with their own arrangements and tools for managing conflicts.

These arrangements and tools may incorporate some or all of the following, taking into account any established market practices for handling such conflicts:

Scoping the engagement

When agreeing the scope of an engagement, Members may wish to define especially clearly any limitations on the extent of their role and the type of advice which they can provide on the engagement.

Conflicts management plan

A written ‘conflicts management plan’ can be shared with (and may be explicitly agreed by) the relevant user(s). Such a plan might typically cover:

  • The extent to which information will remain confidential;

  • The systems and controls in place to identify and assess potential and actual conflicts of interest;

  • The steps taken to reconcile any conflict, and the steps to be taken if the Member cannot continue to act because of an irreconcilable conflict.

Separation of teams

If a Member works within an organisation that has engagements with two users with competing interests, it may be possible to ensure that the users are advised by different teams within the organisation. In some cases, the more ‘mechanical’ work might still be undertaken for both users by a common team.

Information barriers

One option for managing conflicts of interest internally is to establish and maintain arrangements which restrict the flow of sensitive information within the Member’s organisation. Information barriers are administrative, electronic and/or physical barriers to ensure that information used by one part of the organisation is withheld from, or not used by, other parts of the organisation.

Work review

The work review under APS X2 can form an appropriate component of a conflict management policy. Where the work for one user might be seen as potentially creating a conflict with work for another user, independent peer review of that work can form part of the process for ensuring the transparency and objectivity of a Member’s work [4].

Remuneration arrangements

It is important that Members ensure that they are not incentivised by their employer in a way that might be seen to encourage them to provide anything other than the most suitable and appropriate advice to a user of their work.

User consent

Members may be able to reconcile a potential or perceived conflict by obtaining consent from a user to act or continue to act for another user with conflicting interests.  In such cases, the Member will need to consider what will happen if that consent is withdrawn, making it likely that they will have to cease acting for one or both users.

4.6. Where a conflict of interest is identified, Members are encouraged to carefully document the reasoning for their decision to either continue or desist from acting, including the steps that they have taken to reconcile the conflict. Being able to explain and justify the approach they have taken in reaching their decision will assist the Member when being called upon to do so, for example in response to a request from a user or a regulator.

4.7. A note of some helpful questions for Members to consider when managing conflicts is included at Appendix C.


5. Further guidance and advice

5.1. The IFoA offers a confidential Professional Support Service [5]. to assist Members with professional ethical matters, including conflicts of interest. The service is free to all Members.

5.2. This Guide is intended as a useful starting point for Members when considering their conflicts of interest obligations. Some local organisations and regulators, depending on which country or practice area Members are working in, may offer additional guidance which may be of assistance.


Appendices

Appendix A - Examples of possible conflicts of interest

Appendix B - Sample questions for Members to consider in identifying a conflict

Appendix C - Sample questions for Members to consider in managing a conflict

 


[1] Such as those included in the Actuarial Profession Standard: APS P1 “Duties and responsibilities of Members Undertaking Work in Relation to Pension Schemes”. This contains specific requirements for those involved in pensions work in relation to the production of a conflicts of interest management plan and some specific restrictions on the types of advice which may be provided to both the trustees and the sponsoring employer.

[2]  For further information see paragraph 6.4 of the Code Guidance

[3] Amplification 1.2 of the Actuaries’ Code and paragraph 3.9 of the Code Guidance

[4] See Actuarial Professional Standard APS X2: Review of Actuarial Work.

[5] http://www.actuaries.org.uk/regulation/pages/professional-support-service

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Events calendar

  • SIAS Event: CMI Update

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    1 April 2020

    Spaces available

    We are sorry. This event has now been cancelled.

    Following the release of the updated CMI Mortality Projection Model, CMI_2019, the CMI Mortality Projections Committee will lead a discussion on future mortality improvements.

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    In the webinar, Stuart Hitchcock, Head of Portfolio Management for Private Credit, within LGIM Real Assets, will provide some insight into the nature of the private credit markets. Discussion will evolve around development of the markets and lending landscape, key investment characteristics including structural and legal protections, public vs private investments, advantages and drawbacks for borrowers, and attractiveness for investors.

    The webinar will also focus on describing the investment process such as origination through execution, credit, structure, pricing, on-going asset management, portfolio construction within private markets.

  • Spaces available

    Due to the COVID-19, we will be running this programme via a series of webinars commencing 22 April.  

    CIGI is a well-established one-day seminar designed to increase awareness and encourage discussion on a variety of topical issues across the general insurance industry. 

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    InsurTech headlines are often big statements, which seem impossible to many working in the sector day-to-day. How can actuaries implement new systems, keep the value from legacy systems, deliver BAU and not require the resources of three teams?

    This talk:

    • Highlights effective strategies to jump the gap to new technologies
    • Illustrates practices that provide contingency for future technical growth 
    • Introduces the concept of “technical debt” and how you can best manage it
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    Pressure on organisations to address climate change risks is intensifying. But what does this really mean for insurers? In this session Adhiraj Maitra and Gareth Sutcliffe will look at the why, the what and the how of this risk through a number of different lenses including regulatory, principle and resilience.

  • Spaces available

    Update on renewal pricing outcomes for Property and Casualty markets at the latest 1/1 reinsurance renewals.

    The focus will be on capacity availability and price drivers.  These issues include but are not limited to the cat bond market, wider trends in claims outcomes, trends in Casualty RI space that affect pricing such as social inflation, yield curve and the reserving cycle.

    Finally, a note on how this may affect actuarial pricing, reserving and capital.

    Learning objectives: Business knowledge of reinsurance renewal outcomes and the main drivers

  • Spaces available

    The Ogden Discount Rate shock of 2017 brought about a period of profound uncertainty to General Insurance market.  GI Actuaries' first task was to estimate the impact of the Ogden shocks, particularly to reserving and reinsurance pricing.  Their second was to navigate a period of framework uncertainty, maintaining an agility in actuarial modelling as the Civil Liability Bill took shape. 

  • Professional Skills Training - Edinburgh (29 April 2020)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    29 April 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Professional Skills Training - London (29 April 2020)

    Staple Inn, High Holborn, London WC1V 7QJ         
    29 April 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • CANCELLED The Global Actuarial Profession

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    30 April 2020

    Spaces available

    We are sorry that this event has been cancelled.

    The IFoA's policy regarding COVID-19 is designed to safeguard the well-being of members and employees. As stated within the policy, the IFoA is reviewing its events programme on a case-by-case basis.

  • Spaces available

    Working party have been producing a number of deep dive papers, these include topics such as risk adjustment, impact of disclosures on how uncertainty is perceived, deferring acquisition costs over renewals, PAA eligibility and more. 

    We will select where to focus the session based on market focus closer to the time. The plan is to do a detailed session with practical examples and considerations rather than a high level educational session. Very happy to discuss further. 

  • SIAS Event: Cyber Insurance

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    4 May 2020

    Spaces available

    The talk will cover:
    • Why cyber security is regarded as the top threat to businesses (Allianz Risk Barometer 2019)
    • What is causing the shift in threat landscape
    • Who is attacking, why, and how we can stop them
    • Customer impressions of cyber security and how you can help them
    • Threats to evaluating insurable losses and responding to claims
    • How cyber insurance policies have evolved, and need to continue to do so
    • Can and should you recover ransoms under cyber insurance?
    • What is the future for cyber risk?

  • KSS event: Technology: A red-eyed Terminator or an actuary’s best friend?

     Hymans Robertson, Exchange Place 1, 1 Semple Street, Edinburgh, EH3 8BL
    4 May 2020

    Spaces available

    Despite long-running concerns that innovation could lead to widespread redundancy, technology has enabled greater productivity, created higher-value jobs and spurred us on to new heights. With artificial intelligence increasingly automating work undertaken by professionals, I look at the prospects for the actuarial profession in the era of unprecedented technological innovation.

  • Finance and Investment Conference 2020

    Royal College of Physicians, 11 St Andrews Pl, London NW1 4LE
    05-05 May 2020
    Spaces available

    Due to COVID-19, we are running this programme via a series of webinars commencing 5 May.

    The environmental, social and governance (ESG) space is growing rapidly and increasingly moving centre stage. In many cases, it is now an essential part of policy and central to the way stakeholders make decisions for the long term to ensure retention of clients, manage risk better, and ensure more economically efficient and sustainable investment returns.

    ESG factors cover a wide range of areas reflecting how vital consideration of these factors are part of wider systemic risks.

    The IFoA’s policy regarding Coronavirus is designed to safeguard the well being of those who attend IFoA events. Find out more. 

  • Professional Skills Training - Edinburgh (19 May 2020)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    19 May 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Professional Skills Training - London (19 May 2020)

    Staple Inn, High Holborn, London WC1V 7QJ         
    19 May 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • CILA 2020

    Royal College of Physicians, 11 St Andrews Pl, London NW1 4LE
    20 May 2020

    Spaces available

    CILA is aimed at practicing life actuaries from life offices, consulting firms and other employers of actuaries. It will also be of interest to all those who work in, or advise on, the life assurance market in the UK and Europe. The programme this year features a timely mix of hot topics including sessions on:

  • Protection, Health and Care Conference 2020

    The Grand Brighton, 97-99 Kings Rd, Brighton BN1 2FW
    02-03 June 2020
    Spaces available

    The Protection, Health and Care Conference is an annual conference aimed at all insurance professionals with a passion for harnessing insurance risk in their organisations.

  • Spaces available

    How we relate to others at work, whether they are colleagues, clients, prospective clients or other business contacts is key to individual career progression and business performance. People buy people , so considering what we are known for and how to be positively memorable are vital. This session looks at the importance of professional relationships, the psychology of personal image and impact and the three personal impact 'tools' which affect what people say about us when we're not in the room.

  • Mortality and Longevity 2020

    1 Birdcage Walk, Westminster, London SW1H 9JJ
    08-08 June 2020
    Spaces available

    This highly regarded seminar will provide topical and practical updates and discussion on the latest thinking and innovations in mortality and longevity.  The program is designed for life, pensions and health and care actuaries, academics, researchers, underwriters and related practitioners eager to learn about the latest developments in mortality and longevity.  The sessions are designed to be very accessible to a broad range of exp

  • Professional Skills Training - London (10 June 2020)

    Staple Inn, High Holborn, London WC1V 7QJ       
    10 June 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Professional Skills Training - Edinburgh (17 June 2020)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    17 June 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Professional Skills Training - London (18 June 2020)

    Staple Inn, High Holborn, London WC1V 7QJ   
    18 June 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Pensions Conference 2020

    Renaissance Manchester City Centre Hotel, Blackfriars Street, Manchester,M3 2EQ
    18-19 June 2020
    Spaces available

    Join us as this year’s conference that will focus on topics including  funding and savings, pension law current issues, ESG, the end game and transferring risk, investment issues, data visualisation and data science.

  • IFoA Asia Conference 2020, Kuala Lumpur

    CCEC Nexus, 7, Jalan Kerinchi, Bangsar South, 59200 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia
    24-25 June 2020
    Spaces available

    This event has been postponed. A new date will be announced.

    The IFoA's policy regarding COVID-19 is designed to safeguard the well-being of members and employees. As stated within the policy, the IFoA is reviewing its events programme on a case-by-case basis.

    To this end the IFoA and their strategic partner, the AIR, have taken the decision to postpone this year's Asia Conference. A new date will be announced pending further reviews over the following months.