More regulation of actuary audits in the Australian insurance marketplace is needed, according to a leading industry actuary. Piet de Jong, Professor of Actuarial Studies at Macquarie University, says there is a need for more regulation of the methods and systems actuaries use.

“We need systemisation, otherwise you’ll have a situation where actuaries are having totally different predictions,” he said.

Professor de Jong’s comments come hard on the heels of the Australian Prudential Regulation Authority stage 2 reforms, which require annual financial condition reports on general insurers.

He says finding a balanced level of regulation is necessary because “regulations often tend to stifle innovation”.

Current regulation methods mean actuaries have to grapple with giving not just central estimates but also estimating extreme events. A conservative approach often hinders the use of new innovations.

“There is not a great deal of agreement among actuaries about what are the appropriate methods, and actuarial standards tend to be quite conservative in that they don’t react quickly to developments,” he said.