COPLFR

Question 1

Provide a paragraph on reinsurance collectibility to include in the Scope section of the SAO

Gross reserves are $10 million
$8 million of these reserves are ceded
$5 million of these ceded reserves are ceded to reinsurers who are currently insolvent
The only provision for uncollectible reinsurance is $1 million on page 3, line 15, “Provision for reinsurance”

Answer 1

My review of reinsurance recoverable balances found $5M of loss and LAE reserves ceded recoverables to currently insolvent reinsurers. Provisions for uncollectible reinsurance, including the amounts shown on the Liabilities, Surplus, and Other Funds page, Provision for reinsurance, only account for $1M of this amount, with no provision for the remaining $4M. In forming my opinion of the net reserves, I have recognized this $4M as uncollectible.

Question 2

4 topics the appointed actuary must address in the relevant comments of the SAO, regardless of their materiality

Answer 2

• retroactive reinsurance
• collectibility of reinsurance
• abestos/environmental pollution and mass tort reserves
• recoverables from voluntary/ involuntary market pools

Question 3

4 exemptions from producing SAO

Answer 3

• small companies: < $1M of total direct and assumed premiums and < $1M of direct and assumed loss & LAE reserves
• insurers under supervision or conservatorship
• nature of business
• financial hardship: if cost of SAO > (1% of capital & surplus) Or (3% of direct and assumed premiums)

Question 4

5 categories of Actuarial Opinion

Answer 4

• reasonable provision
• deficient provision
• redundant provision
• qualified opinion
• no opinion

Question 5

Items listed in the Loss Reserve section of Exhibit A

Answer 5

• reserve for unpaid losses
• reserve for unpaid LAE
• reserve for unpaid losses - D&A
• reserve for unpaid LAE - D&A
• retroactive reinsurance reserve D&A
• other loss reserve items