The Institute and Faculty of Actuaries (IFoA) have issued a risk alert to all its members on the impact of high inflation.
According to the IFoA, major global economic pressures are driving inflationary measures to high levels, raising the possibility of economic uncertainty which could potentially affect actuarial practise. The IFoA stresses the importance of actuaries taking into account all relevant market factors, including their nature, likelihood of rapid change, and impact on their work.
The risk alert seeks to help members understand how the current, noticeably high levels of inflation may impact actuarial practice. Actuaries employed by general, life, and pension insurance companies are given special attention in the risk alert.
The risk alert states that all members should adjust their work by appropriately taking into account expectations of future inflation, different types of inflation, the impact of the current environment of high inflation on underlying methodologies, and the quantification of uncertainty, to ensure that the user of the work is aware of the potential range of outcomes.
IFoA regulatory board chair Neil Buckley says: “The actuarial profession is a key part of the global financial sector which has not operated in a high inflation environment, such as the current one, for many years. We know that members will be aware of the uncertain economic environment and rapidly changing market conditions.
“By issuing this Risk Alert, we are aiming to bring this issue to the attention of the profession and support members by alerting them to some areas of work which need careful consideration.
“As a royal chartered professional body and regulator, it is our role to highlight external factors that will have a significant impact on actuarial practice. It is crucial that we ensure that both the IFoA and its members are acting in the public interest.”
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