The Faculty of Actuaries in Scotland

Why Edinburgh Needed Its Own Body

The Institute of Actuaries had been founded in London on 8 July 1848, when about fifty men holding actuarial posts voted into being “The Institute of Actuaries of Great Britain and Ireland”, with the National Debt actuary John Finlaison as its first president. Its name claimed the whole islands. Within eight years Scotland had opted out of that claim, for reasons that are unglamorous and well documented.

The first was distance. Profession histories cite plainly the difficulty of getting to London for meetings in the 1850s. The second was law: Scotland’s separate legal system and institutional habits made a separate professional body feel natural rather than separatist. The third, and the real engine, was industry.

Scottish Widows itself shows how deep the habit went. It was conceived at a meeting of prominent Scotsmen in the Royal Exchange Coffee Rooms in Edinburgh in March 1812, in the aftermath of the Napoleonic Wars, to create a “general fund for securing provisions to widows, sisters and other female relatives”. It opened as Scotland’s first mutual life office, with an official start date of 2 January 1815, and by 1862 was described as the largest mutual life office in the world. It demutualised into Lloyds TSB on 3 March 2000 and today sits inside Lloyds Banking Group with roughly £232bn of assets under administration. Standard Life, meanwhile, grew into what has been called Europe’s largest mutual life company.

The Ministers’ Widows’ Fund, 1743–1744

The genuinely world-historical Scottish contribution happened 112 years before the Faculty existed, and it was the work of two parish ministers. The Rev. Dr Robert Wallace (1697–1771) and the Rev. Alexander Webster (1707–1784) wanted a permanent, self-sustaining fund to pay annuities to the widows and orphans of Church of Scotland ministers, and later of Scottish university professors.

The novel decision was structural. Instead of paying this year’s widows out of this year’s contributions, they designed an accumulating fund that would invest its surplus and meet benefits out of investment returns. That immediately created the modern actuarial problem: money flows in and out at different times, so premiums must be set correctly years or decades in advance. To solve it they used the best tools of 1743 — Edmond Halley’s mortality table of 1693, built from Breslau data; compound-interest mathematics; and population returns gathered from Scotland’s presbyteries. Their model projected that of roughly 930 living ministers about 27 would die each year, leaving about 18 widows dependent on the fund.

Colin Maclaurin (1698–1746), professor of mathematics at the University of Edinburgh, helped — checking and computing. A photograph of his hand-written calculation of a “3.81 multiple”, dated 23 May 1743, is reproduced in the standard scholarly history. Modern scholarship gives the primary mathematical theory to Wallace, the statistics to Webster, and verification and refinement to Maclaurin. Popular accounts sometimes promote Maclaurin to author of the whole scheme — and one has even garbled his name to “Colin McClory”.

The chronology is unusually well documented from National Records of Scotland church records: the General Assembly approved the scheme on 12 May 1743; the founding Act received royal assent on 2 March 1744 (17 Geo. II c.11); the fund became operational in 1744; and an amending Act followed on 26 May 1749. In 1748 the trustees published Calculations, with the Principles and Data on which they are instituted… Shewing the Rise and Progress of the Fund — often described by the profession as effectively the first published actuarial report anywhere in the world. The fund ran until 1993, roughly 250 years.

How strong is the “world’s first” claim? Historians support it with a qualifier, and the qualifier is load-bearing. The careful formulations are “the first practical application of mathematics to manage an insurance fund”, “the earliest actuarial fund in the world”, and “the world’s first soundly-funded pension plan”. The reason for the hedge is the Mercers’ Company scheme in London, adopted from Dr William Assheton’s proposal in 1698–99, which paid annuities to clergy widows but charged flat rates with no proper age-based mortality calculation, slid into deficit and had to petition Parliament for relief in 1747. Scotland’s fund was not the first such scheme; it was the first one built to survive, and it did.

Its influence travelled through Dr Richard Price’s Observations on Reversionary Payments (1771), which became a standard work on life insurance and carried the methods into general practice.

The “Within £1” Story

This is the best teaching case on the whole card, because the myth is more famous than the fact and the fact is impressive enough without it.

A related figure that circulates separately — “£47,313 by 1758 against a forecast of £58,348” — could not be corroborated in authoritative sources at all, and should be treated as unverified rather than quoted as a corrective. The honest position is the modest one: a fund designed in 1743 tracked its own projections within a few per cent for decades. The popular retellings are evidence of the story’s appeal, not of its accuracy.

The 1868 Royal Charter

In September 1868 the Faculty of Actuaries became the first actuarial organisation anywhere in the world to be granted a Royal Charter. The London Institute received its own charter in 1884, sixteen years later. The Faculty’s charter confirmed its right to confer the FFA qualification, which is exactly what a charter is for: it converts a voluntary association’s examinations into a publicly recognised licence to practise a discipline.

This is the claim on which the card should rest, because it survives every check. It is institutional rather than mathematical, and it is dated, sourced and unambiguous. It is also the correct answer to the seductive but wrong claim that Scotland invented the actuarial profession. London organised the profession first, in 1848. Edinburgh got it chartered first, in 1868. Both are real, and stating them together is more interesting than pretending one did not happen.

It is worth being equally careful about what belongs to the joint profession rather than to the Faculty alone. The Continuous Mortality Investigation was formalised in 1931 as a joint Institute-and-Faculty body; joint professional guidance notes were first issued in 1976; the FT-Actuaries share indices were created with the Financial Times in 1962. None of those is an Edinburgh first.

154 Years, Then a Merger

For a century and a half the Faculty and the Institute were separate bodies that steadily converged. Their qualifications and professional standards became identical; from 1994 they ran joint examinations; by the 2000s almost every function was operated jointly, with Maclaurin House in Edinburgh housing the Faculty Council and shared executive and regulatory work.

The merger path was not smooth. In November 2006 the incoming Faculty president announced an investigation into merging. A first formal vote on 23 July 2009 cleared the Faculty’s threshold but failed at the Institute. A revised proposal went to members on 25 May 2010 and both bodies voted in favour, against organised opposition from FIDELIS, the Actuarial Defence Group formed in November 2008 by several past presidents and vice-presidents. After Privy Council approval, the Institute and Faculty of Actuaries came into being on 1 August 2010, implemented by amendments to the Institute’s Royal Charter, with the combined body assuming the assets and liabilities of both predecessors. The Scot Ronald Bowie was its first president. Both predecessor bodies ceased to exist as separate entities that day — which is why writing about “the Faculty” in the present tense is a small but common error.

The IFoA and Edinburgh Today

The IFoA is the UK’s only chartered professional body for actuaries, and its own facts-and-figures page states that it “represents and regulates over 34,000 members worldwide”. It works from offices in London, Oxford and Edinburgh, plus regional offices in Beijing, Malaysia and Singapore; the Edinburgh office is at Level 2, Exchange Crescent, 7 Conference Square. Governance is by a Council under the Royal Charter, and in the UK the profession is overseen by the Financial Reporting Council, which sets Technical Actuarial Standards and monitors the IFoA’s own regulation. A Chartered Actuary designation was introduced in November 2024.

Edinburgh has not stopped being an actuarial city. It remains the UK’s second-largest financial centre after London, with a heavy concentration of asset management, insurance, banking and pensions work, and a correspondingly deep actuarial employment base across firms including Aberdeen, Baillie Gifford, Scottish Widows, Standard Life and Aegon, alongside the large consultancies. The IFoA still brings major events, such as its Life Conference, back to the city where the profession first won a charter.

Timeline

1. 1693

   Halley publishes his mortality table

   Breslau data; the statistical tool the Scottish fund would use

2. 1698–99

   The Mercers' Company scheme, London

   Clergy widows' annuities without age-based mortality maths; it failed

3. 12 May 1743

   General Assembly approves the Widows' Fund

   Wallace and Webster's accumulating-fund design accepted

4. 23 May 1743

   Maclaurin dates a surviving calculation

   His hand-written “3.81 multiple”, reproduced in Dunlop (1992)

5. 2 Mar 1744

   Royal assent to the founding Act

   17 Geo. II c.11; the fund becomes operational that year

6. 1747

   The Mercers' scheme petitions Parliament

   In deficit — the contrast that gives Scotland its qualifier

7. 1748

   The trustees publish their Calculations

   Often called the first published actuarial report anywhere

8. 1762

   “Actuary” used in its modern insurance sense

   By the English Society for Equitable Assurances — not in Scotland

9. 1771

   Richard Price's Observations on Reversionary Payments

   Carries the Scottish fund's methods into standard practice

10. 1812–1815

    Scottish Widows conceived and opened

    Royal Exchange Coffee Rooms, March 1812; start date 2 January 1815

11. 1833–1841

    Scottish life offices organise

    Association of Managers becomes the Associated Scottish Life Offices

12. 8 July 1848

    The Institute of Actuaries founded in London

    The world's first actuarial professional body; John Finlaison president

13. 4 Jan 1856

    The Faculty of Actuaries founded in Edinburgh

    38 Scottish actuaries, their own examinations from the start

14. 1857

    Edward Sang gives the first actuarial lectures

    Teaching built into the Faculty's purpose

15. Sept 1868

    The Faculty receives a Royal Charter

    First actuarial body in the world to hold one; FFA confirmed

16. 1884

    The Institute receives its charter

    Sixteen years after Edinburgh

17. 1904

    Transactions of the Faculty of Actuaries begins

    Successor to the Actuarial Society of Edinburgh's Transactions, 1886–1901

18. 1931

    The Continuous Mortality Investigation formalised

    A joint Institute-and-Faculty body, not a Faculty achievement alone

19. 1993

    The Ministers' Widows' Fund closes

    After roughly 250 years of operation

20. 1994

    Joint examinations with the Institute

    Qualifications and standards already identical

21. 23 July 2009

    First merger vote

    Passes the Faculty threshold, fails at the Institute

22. 25 May 2010

    Revised merger proposal carries in both bodies

    Opposed by FIDELIS, formed November 2008

23. 1 Aug 2010

    The IFoA comes into being

    Ronald Bowie, a Scot, its first president

Did You Know?

• Two Church of Scotland ministers, not bankers, designed the world's first soundly-funded pension scheme.
• Colin Maclaurin's own working — a “3.81 multiple” dated 23 May 1743 — still survives and has been photographed for publication.
• The fund's designers used a mortality table built from records in Breslau, 800 miles away, because it was the best data in Europe.
• The scheme's 1748 report is often called the first published actuarial report in the world.
• The Ministers' Widows' Fund ran for about 250 years, closing only in 1993.
• Edinburgh's actuaries got a Royal Charter in 1868; their London colleagues waited until 1884.
• The Faculty had just 38 fellows two years after its founding.
• The word “actuary” in its insurance sense is English, first used in 1762 by a London society.
• Scottish Widows was hatched in a coffee house on the Royal Exchange in March 1812.
• The merged body's first president, Ronald Bowie, was a Scot — a small consolation for losing the Faculty's name.

Honest Caveats

The “£1” story is not history. Use “within about 5% of the 1748 estimates” instead, and treat the rival “£47,313 by 1758” figure as unverified.

Scotland did not invent actuarial science. First soundly-funded scheme, 1744; first chartered body, 1868. First professional body: London, 1848.

“World’s first pension fund” needs its qualifier. Without “soundly-funded” or “actuarially sound”, the Mercers’ scheme of 1698–99 gets there first.

Maclaurin’s role is routinely inflated. Wallace supplied the theory.

Bayes was English. Hume belongs in the Enlightenment probability context; Bayes does not belong to Scotland.

Founding dates get rounded. Celebratory sources say simply “1856”, and one profession history uses “1742” for the pension scheme; the archival chronology is 4 January 1856 and 1743–44 respectively.

The best sources are hard to reach. Dunlop (ed., 1992), Dow (1971) in the Transactions of the Faculty of Actuaries, Hare & Scott (1992), Milevsky (2024) and Lewin (2003) are largely in print or behind paywalls. The frequently quoted claim that Lewin found the first known emerging-cost estimates for a pension fund in the 1743 pamphlet deserves a page-level check before being treated as documented.

Profession histories are celebratory. The Actuary’s feature “Back to the future” is a useful overview, but its rounded dates and superlatives should be read as anniversary writing.