2.2 COPLFR Actuarial Report Flashcards
What should be covered in the actuarial report?
In the actuarial report, the actuary should state the actuarial findings, and identify the methods, procedures, assumptions, and data used by the actuary with sufficient clarity that another actuary qualified in the same practice area could make an objective appraisal of the reasonableness of the actuary’s work as presented in the actuarial report.
How long must a company keep an Actuarial Report and underlying actuarial workpapers supporting the Actuarial Opinion?
7 years
What is the due date of the Actuarial Report supporting an SAO?
According to NAIC SAO Instructions, Actuarial Reports “…must be available by May 1 of the year following the year- end for which the Opinion was rendered or within two (2) weeks after a request from an individual state commissioner.” However, requirements may vary by state. For example, Colorado requires the Actuarial Report to be issued within 30 days of the Actuarial Opinion if the carried reserves are less than the Appointed Actuary’s best estimate (Statute Title 10, 3-1-3 § 6).
Signature line for Actuarial Report
Consistent with SAO:
*Signature of Appointed Actuary
*Printed name of Appointed Actuary *Employer’s name
*Address of Appointed Actuary *Telephone number of Appointed Actuary *Email address of Appointed Actuary *Date report was issued
The NAIC SAO Instructions include the following requirement of Actuarial Reports with respect to LTC and Long-Duration Contracts:
Actuarial Report should contain disclosure of all reserve amounts associated with A&H Long Duration Contracts reported by the Company; the reserve amounts in the Actuarial Report should tie to the Annual Statement.
Description of Appointed Actuary’s relationship to the Company
A description of the Appointed Actuary’s relationship to the Company, with clear presentation of the Actuary’s role in advising the Board and/or management regarding the carried reserves. The Actuarial Report should identify how and when the Appointed Actuary presents the analysis to the Board and, where applicable, to the officer(s) of the Company responsible for determining the carried reserves.
Exhibit comparing Appointed Actuary’s conclusions to carried amounts in Annual Statement
An exhibit that ties to the Annual Statement and compares the Appointed Actuary’s conclusions to the carried amounts consistent with the segmentation of exposure or liability groupings used in the analysis. The Appointed Actuary’s conclusions include the Appointed Actuary’s point estimate(s), range(s) of reasonable estimates or both.
The NAIC SAO Instructions include the following requirement of Actuarial Reports (in regards to Schedule P):
An exhibit that reconciles and maps the data used by the Appointed Actuary, consistent with the segmentation of exposure or liability groupings used in the Appointed Actuary’s analysis, to the Annual Statement Schedule P line of business reporting. An explanation should be provided for any material differences.
How should the Appointed Actuary compare to the prior Actuarial Report?
An exhibit or appendix showing the change in the Appointed Actuary’s estimates from the prior Actuarial Report, including extended discussion of factors underlying any material changes. The exhibit or appendix should illustrate the changes on a net basis, but should also include the changes on a gross basis, if relevant. If the Appointed Actuary is newly-appointed and does not review the work of the prior Appointed Actuary, then the Appointed Actuary should disclose this.
To meet the requirements of this part of the NAIC SAO Instructions, and in accordance with the spirit in which COPLFR believes these Instructions are intended, the Appointed Actuary may wish to consider including the following in the Actuarial Report (gross and net of reinsurance):
1) Exhibit(s) and discussion related to significant changes
in point estimates from the prior Actuarial Report (if a
point estimate is included in the Actuarial Report), categorized by reviewed segment, accident year, and in total.
2) Exhibit(s) and discussion related to significant changes in the range of estimates from the prior year (if a range is included in the Actuarial Report), if meaningful and practical, including discussion of any significant expansion or contraction of the range relative to the prior Actuarial Report.
My analysis of the Company includes interim reserve evaluations in addition to the analysis supporting the SAO. What should be included in the exhibit showing the change in actuary’s estimates?
While a comparison to interim analysis estimates may be instructive, the requirement is for the change in estimates and relevant discussion be relative to the Actuarial Report that supported the prior SAO.
Is the extended comments on risks and uncertainties section still a requirement if the Opinion states there are not significant risks that could result in material adverse deviation?
Yes. Section 4.1.3d of ASOP 41 states that the actuary should disclose “any cautions about risks and uncertainty” in any actuarial report, unless the actuary determines it is inappropriate to do so. In addition, the 2020 NAIC SAO Instructions state that a discussion of risk factors is to be included in the SAO even when the actuary concludes there is no material risk of adverse deviation, and this requirement would similarly extend to the Actuarial Report.
The NAIC SAO Instructions also include a requirement for the Actuary to include additional discussion in the Actuarial Report if the company triggers an unusual result on one of the reserve-based IRIS Ratios:
Extended comments on factors that led to unusual IRIS ratios for One-Year Reserve Development to Policyholders’ Surplus, Two-Year Reserve Development to Policyholders’ Surplus, or Estimated Current Reserve Deficiency to Policyholders’ Surplus, and how these factors were addressed in prior and current analyses.
While all ASOPs are binding, the following are specifically cited or referenced within this Practice Note:
*ASOP No. 1, Introductory Actuarial Standard of Practice
*ASOP No. 20, Discounting of Property/Casualty Unpaid Claim Estimates
*ASOP No. 21, Responding to or Assisting Auditors or Examiners in Connection with Financial Audits, Financial Reviews, and Financial Examinations
*ASOP No. 23, Data Quality
*ASOP No. 36, Statements of Actuarial Opinion Regarding Property/Casualty Loss and Loss
Adjustment Expense Reserves
*ASOP No. 41, Actuarial Communications
*ASOP No. 43, Property/Casualty Unpaid Claim Estimates
*ASOP No. 56, Modeling
COPLFR has received permission to reproduce SSAPs deemed to be particularly applicable to actuaries signing NAIC P&C SAOs per a COPLFR review. These SSAPs are as follows:
*SSAP 5R: Liabilities, Contingencies and Impairment of Assets
*SSAP 9: Subsequent Events
*SSAP 29: Prepaid Expenses
*SSAP 53: Property Casualty Contracts - Premiums
*SSAP 55: Unpaid Claims, Losses and Loss Adjustment Expenses
*SSAP 57: Title Insurance
*SSAP 58: Mortgage Guaranty Insurance
*SSAP 62R: Property and Casualty Reinsurance
*SSAP 63: Underwriting Pools and Associations Including Intercompany Pools
*SSAP 65: Property and Casualty Contracts
*SSAP 66: Retrospectively Rated Contracts
