Organisations offering equity release products also view pricing and propositions as technical actuarial work. The report from the Institute and Faculty of Actuaries (IFoA) provides a clear picture of where actuaries are applying their skills in this market. It also identifies areas of potential risk for the market as a whole as it continues to grow.
Actuaries have a high level of involvement in different aspects of the market, alongside other equity release experts, and there is an awareness of the importance of balancing customer outcomes with commercial considerations. As the market continues to grow, there may be increased actuarial involvement, with an ongoing public interest role, ensuring that long-term risks and potential outcomes are carefully considered on behalf of those looking to take equity release and those firms offering it.
Neil Buckley, Lay Chair of the IFoA Regulatory Board, said: “We would like to thank all IFoA members and organisations that took part in our thematic review. Their contribution has helped us to gain a deeper level of insight into where actuaries are using their skills in the development of equity release products. We now have a greater understanding of the areas where actuaries have significant involvement and influence and where our regulatory framework can support an ongoing key public-interest role in this growing market.”
The review also draws out some risks and considerations associated with the equity release market for actuaries to be aware of. These include:
• A need for active consideration by actuaries and their firms to ensure products and pricing remain appropriate given the current changing economic conditions and potential shocks
• A good understanding of the regulatory focus and requirements in the equity-release market from both the Prudential Regulation Authority and the Financial Conduct Authority
• Consideration of potential legacy issues, in common with other financial products, especially given the older and sometimes more vulnerable demographic for the product
Alan Marshall, report author and IFoA Review Actuary, said: “The long term nature of equity release products, alongside considerations such as longevity, long-term care needs and pricing options means the actuarial skillset is well positioned to help deliver a suitable product for both customers and firms. It is important that equity release products are designed, priced and sold in a way that inspires confidence in the market. Actuaries, alongside other financial professionals, can use their skills and judgement to assess the complex risks involved and balance the needs of customers and firms.”
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