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exam 6 NEW > 1. SOA COPFLR > Flashcards

1. SOA COPFLR Flashcards

1
Q

Narative part of Actuarial report

A

conclusion/recommendation for audience: regulators & board of directors

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2
Q

Technical part of Actuarial report

A

Opinions methods & loss triangles w/ enough clarity so actuary in same field can evaluate work

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3
Q

Actuarial report

confidential or public

audience

file by date

keep how long?

A

Confidential

Audience = regulators + board of directors

Filed by 5/1

7 years

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4
Q

Actuarial Report 6 requirements

A
  1. RMAD (extended comments)
  2. Unusual IRIS 11-13 (extended comments)
  3. Exhibit of Schedule P reconciliation
  4. Exhibit of comparison b/w carried rsv amt & actuarys estimate
  5. Exhibit of Change in estimates (vs prior act report)
  6. Appointed Actuary’s affiliation to company
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5
Q

Actuarial Opinion Summary,

confiedntial or public

filed with whom

filed by date

audience

A

Confidential

Filed w/ just domiciliary state

Filed by 3/15

Audience = regulators

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6
Q

Actuarial Opinion Summary (AOS) parts

A

A: range of actuarys rsvs (net & gross) in scope

B: pt estimate of actuary rsvs (net & gross)

C: carried rsvs (net & gross)

D: difference bw C and A/B (net & gross)

E: adverse development: is 1 yr adverse development at least 5% in at least 3 of past 5 Calendar Years?

answer yes or no

IF yes THEN why

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7
Q

Actuarial Opininion Summary (AOS) parts A-D for Qualified Opinion where actuary chooses not to have a range

assume actuarys pt estimate is 500 less than the total carried of 10,000

10% of carried rsvs are excluded from the opinion

A

Include both net and gross

A: range NA

B: pt. estimate 9,500

C1: total carried 10,000

C2: carried portion excluded from opinion 1,000

C3: carried portion covered by opinion 9,000

D: difference = C3-B = 9,000-9,500 = -500

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8
Q
A
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9
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A
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10
Q

Need to disclose both range & point estimate in Actuarial Opinion Summary (AOS)?

A

NO

Exception: IF range & pt estimate are used for 2 different portions of the rsvs THEN show how both combine to match SAO

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11
Q
A
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12
Q
A
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13
Q

Actuarial Opinion Summary (AOS) if 0% pool participant

A
  1. State that company is 0% pool participant
  2. # s presented will be from lead company
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14
Q

actuary gross/actuary net/carried gross/ carried net are…

loss rsvs 1000/400/950/400

lae rsvs 500/200/500/180

UEP rsvs for Long Duration contractsd 20/10/30/20

actuarys doesnt care about range

AOS parts A, B, C, D=?

A

GROSS NET

A: NA NA

B: 1520 610

C: 1480 600

D: -40 -10

include UEPR

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15
Q

Actuarial Opinion Summary (AOS) if 25% pool participant

A
  1. State that company is 25% pool participant
  2. # s are presented AFTER pool% applied
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16
Q
A
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17
Q

Exh A of SOA (#s reflect company share of pool if applicable)

A
  1. Net Loss rsvs
  2. Net LAE rsvs
  3. Direct & Assumed Loss rsvs
  4. Direct & Assumed LAE rsvs
  5. Write-ins
  6. Other L&LAE rsvs
  7. Net UEP rsvs on long duration contracts
  8. Direct & Assumed UEP rsvs on long duration contracts
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18
Q
A
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19
Q

Exh B of SOA (based on NET rsvs) (#s reflect company share of pool if applicable)

7 parts?

based on net or gross opinion?

what if company is lead co in intercompany pooling?

A
  1. Name of appointed actuary
  2. Affiliation to company (i.e. employee)
  3. Credentials (FCAS)
  4. Type of opinion (based on net rsvs)
  5. Materiality standard (0 if 0% share in pool (like lead co)
  6. RMAD Yes/No? (NA if 0% share in pool (like lead co)
  7. Surplus amt
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20
Q
A
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21
Q

Reason for SAO or AOS exemption (4)

exemptions are the same for both SAO and AOS

A
  1. Size: <1M GWP @ yr end (GWP = Direct + Assumed)
  2. LOB: certain lob
  3. Supervision: insurer under supervision
  4. Hardship: SAO cost >1% of CY capital & surplus OR SAO cost >3% of CY GWP
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22
Q

Appointing Qualified Actuary (5)

A

by 12/31 Board of directors inform DOI commish w/ in 5 business days of appointment

  1. Name
  2. Title
  3. Date appointed
  4. Who appointed (board of directors)
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23
Q

Changing Appointed Qualified Actuary (2)

A
  1. Inform DOI commish in writing w/ in 5 business days of appointment
  2. Inform DOI commish in writing w/ in 10 business days of disagreements bw company & prior appointed actuary (about opinion, RMAD, disclosures, scope, data quality) (Prior actuary agrees or disagrees)
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24
Q

Disclosures required if appointed actuary relies on NONactuary for material portion of rsvs (4)

A
  1. Name (of non actuary)
  2. Affiliation to company
  3. Their Methods/assumptions
  4. Review their work & say it is reasonable
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25
Qualifications of Qualified Actuary (3)
1. 3 yrs experience 2. CAS member in good standing OR AAA member in good standing & approved by CPC of AAA 3. 30 hours continuing education
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Disclosures required if appointed actuary relies on _OTHER actuary_ for material portion of rsvs (3)
1. Name (of other actuary) 2. Credentials 3. Affiliation to company
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_Statement of Actuarial Opinion_ (SAO) public or confidential filed with whom? filed by date audience?
Public Filed w/ domiciliary state, NAIC, annual statement Filed by March 1 Audience = regulators
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SAO Purpose (3)
1. rsv *opinion* 2. Inform regulators of *risks* 3. Advise whether risks lead to *RMAD*
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SAO Identification section (5 parts)
1. date (actuary was) appointed 2. name 3. credentials (FCAS & member of CAS or AAA) 4. affiliation to company (employee) 5. appointed by board of directors
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_SAO Scope_ Section(8 parts)
1. rsv items (in opinion i.e L&LAE, retroactive reinsurance, UPR) 2. stated basis of rsvs (i.e. nominal or discounted, gross or net of recoverable, types of LAE in rsvs, opinion on just portion of rsvs?) 3. review date 4. Data sources (person not company) 5. Is data reasonable & consistent? 6. Review of Methods & Assumptions 7. Reconciliation to schedule P part 1 (net paid losses by AY & LOB, explain material discrepancies) 8. Intercompany pooling (lead co & state + other companies & states, & pool%s) (IF company has/ 0% share THEN SAO reflects lead company)
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_SAO Scope_ example
1. I have examined actuarial assumptions and methods used in determining rsvs in _Exh A /w state regulators_ 2. As of 12/31/12 (end of year) w/ info thru 9/30/12 (_review date_) 3. Reconciles w/ schedule P Part 1 4. w/ data from person x & their title 5. evaluated data for reasonableness & consistency
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**scope** - evaluation of data for reasonability and consistency what if data is not reasonble or consistent?
appointed actuary may either... 1. not rely on the data to issue opinion OR 2. issue no opinion
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_SAO Scope_ - _Reconciliation to schedule P part 1_ If difference CAN be explained
1. State differences are not material OR due to known causes (not error)
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_SAO Scope - Reconciliation to schedule P part 1_ If difference CAN NOT be explained? (3)
1. Disclose differences in SAO scope AND actuarial report 2. Issue qualified opinion 3. Recommend informing external auditors
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Definition of _No Opinion_
Can not reach CONCLUSION because of... deficiencies or limits in data, analyses, assumptions
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Definition of _Qualified Opinion_
Can not GIVE opinion because a) rsvs cannot be estimated b) OR material part of rsvs cannot be estimated
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_Qualified Opinion_ Disclosures (3)
1. Why qualified? (not enough info or can't tell if material) 2. $Amt of qualified items 3. List qualified items
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_Qualified Opinion_: disclosures if portion of business is material to loss rsvs
not enough info to perform review
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_Qualified Opinion_: disclosures if portion of business is NOT material to loss rsvs
Do NOT issue qualified opinion
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Qualified Opinion: disclosures if portion of business is outside scope of actuarys review
Disclose that portion of business is outside scope of actuary's review
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_Qualified Opinion_: disclosures if portion of business may be material to loss rsvs
not enough info to perform review OR unable to conclude if material
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_SAO Opinion_ section wording
1. Amounts carried in _exh A_... 2. Meet the requirements of insurance laws of MO (_state of domicile_)... 3. Computed in accordance w/ accepted actuarial standards & principles... 4. Make a _reasonable_ provision for unpaid L&LAE for company under terms of its contracts & agreements
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_SAO Opinion_ section wording if net rsvs are reasonable but gross rsvs are deficient
1. Make a _reasonable_ provision for _net_ unpaid L&LAE 2. BUT _deficient_ provision on _gross_ unapid L& LAE 3. Provision for gross unpaid L&LAE is $x less than the minimum amt I consider to be w/ in reasonable range
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SAO _Relevant comments_ (11 parts)
1. RMAD exist yes or no? + materiality standard (causes of RMAD & how mitigate) 2. Company risk factors 3. IRIS ratios 11-13 (**are they unsual? why unusual?)** 4. S&S (are rsvs gross or net of S&S?) 5. Reinsurance (retroactive & financial & collectability) 6. Discounting (amt of tabular & non-tabular discount in rsvs) 7. UW pools & associations 8. Asbestos/environmental liability 9. ∆ in methods/assumptions 10. Extended reporting endorsements 11. Long duration contracts (UEP)
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relevant comment RMAD language
considered _company risk factors_ when picking reasonable range or rsvs considered whether there are _risks_ that could cause RMAD conclude risks would not cause _RMAD_
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SAO relevant comments about RMAD (3)
RMAD exist yes or no? materiality standard causes of RMAD & how mitigate
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_Materiality standards_ (4)
1. ∆ in surplus to change financial rating 2. ∆ in surplus to trigger next Rbc level 3. ∆ in rsvs to cause unusual IRIS ratio 11 or 12 4. 10% of surplus, 10% of pt estimate, 10% of rsvs
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SAO _relevent comments_ company risk factors
operational change reinsurance collectibility cats asbestors soft markets (low prices) rapdi growth LOB w/ little expertise ∆ in known case rsv adequacy
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relevant comments - S&S name disclousres
are carried loss rsvs net or gross of S&S? ## Footnote SAO is prepared on same basis
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relevant comments - discounting disclosures (3)
are rsvs discounted? which liabilities are discounted? discount is x% of rsvs or y% of surplus
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Relevant comments on financial reinsurance (3)
1. Contracts exist? 2. Prospective or retroactive reinsurance? 3. contract accounted for correctly w/ deposit accy? (deposit accy if missing either timing or UW risk)
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_Relevant comments_ on reinsurance collectability (4)
includes both qualitative & quanitative info (better than schedule F - just quanitative) appointed acuary dutuies before commented: ask managment, review reinsurer ratings, examine Schedule F 1. Material uncollected amt from troubled reinsurers? 2. Material disputed amts? 3. Reinsurance highly concentrated? 4. Reinsured financially sound?
67
_Relevant comments_ on retroactive reinsurance (3)
_Only comment if retroactive accy was used (in such case → no impact on actuarial opinion nor loss rsvs)_ 1. retroactive contracts exist? if yes --\> was contract appropriately accounted for? 2. did contract have material impact on RMAD? 3. Disclose rsvs are gross of ceded retroactive reinsurance
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Relevant comments: Changes in assumptions/methods (2)
Disclose changes in assumptions & methods IF 1a) material impact on reserves OR 1b) unknown if changes are material 2) if unable to review work of prior appointed acutary
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_Relevant comments_: Environmental/asbestos Liabilities (4)
1. Material exposure? (no coverage, yes coverage RMAD unlikely, yes coverage maybe RMAD) 2. Net Rsv amt 3. variablitty/uncertainity in net rsv amt 4. Specialized claims or legal unit is handling A&E claims?
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_Relevant comments: Long duration contracts_ (13+ months, can not cancel, can not raise prem) (4)
1. Materiality standard 2. UEPR amt 3. UEPR as % of total UEP **4. State no long duration contracts exist OR UEPR on LDC is _immaterial_ OR UEPR on LDC is _material_** (if material then include long duration contract amts in Exh A lines 7&8 & opinion paragraph)
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_Relevant comments_: Pools & associations (3)
1. Pool reserves material? 2. IF booking lag of pool losses exists THEN is it material? 3. Net rsv amt for company share of pool
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Retroactive reinsurance treatment in SAO
Does not reduce rsvs no impact on rsv range nor opinion (negative liability in SAP)
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How to fix SAO or AOS error (2)
1. Notify board of directors w/in 5 days 2. send notice, fixed SAO, reason for error to state DOI commish
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