D - OSFI AA Flashcards

1
Q

OSFI AA

Requirement to be appointed the AA.
Can a CEO be AA?
Can a COO be AA?
Can a CFO be AA?

A

Actuary must be FCIA

CEO : NO unless authorized by SI
COO : NO unless authorized by SI
CFO : NO, unless Audit committee provided written statement to SI and authorized by SI

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2
Q

OSFI AA

Tasks of AA when resigning or getting revoked

Tasks of next AA if previous AA resigns or got revoked

A

(1) submit a written statement to BOARD and SI explaining reasons and circumstances, or why in his opinion he was revoked
(2) Request and Receive from previous AA the written statement he submitted to Board and SI before accepting the position.

Appointment can be accepted 15 days after the request was made.

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3
Q

OSFI AA

5 roles and duties of AA

A

-1-
AAR
opine that policy liabilities are valued in accordance with AAP

-2-
Meet with Board each FY and report on financial POSITION

-3-
DCAT
Report to Board on expected future financial CONDITION

-4-
Report in writing on MATERIAL ADVERSE EFFECT REQUIRING RECTIFICATIONS to CEO and CFO (send a copy to Board)

-5-
Report to Board in writing ON FAIRNESS of dividends to be paid to PARTICIPATING POLICYHOLDERS

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4
Q

OSFI AA

3 CIA Rules of professional conduct

A
-1-
Act honestly 
-2-
work when QUALIFIED TO DO SO
-3-
meet SoPs.
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5
Q

OSFI AA

4 expected qualifications of AA

A

FCIA

1- Work in Canada 3 of last 6 yrs, 1 of those in Canadian valuation

2- Experience with CIA’s SOP and relevant regulation

3- Up-to-date CIA’s continuing professional development requirement

4- No adverse findings from CIA Disciplinary Tribunal (SI may conclude that AA is still suitable depending on the case)

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6
Q

OSFI AA

3 objectives of OSFI in requiring PEER REVIEW of AA’s work (by a reviewer)

A

Help OSFI in determining safety and soundness of insurer

provide independent consulting and professional education to AA

provide confidence in the work of AA to the public, board and regulator

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7
Q

OSFI AA

7 responsibilities of EXTERNAL REVIEWER when assessing safety and soundness of insurer

A

confirm valuation work complies with AAP

review adequacy of procedures

review methods/assumptions in valuation work and discuss with AA whether they are APPROPRIATE

determine whether AAR sufficiently describe methodologies and assumptions used by AA

review actuarial work in MCT

review DCAT work and other stress tests

fully document findings and REPORT to OSFI

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8
Q

OSFI AA

5 examples of material changes affecting valuation of policy liabilities

A
  1. change in key ASSUMPTIONS
  2. change in METHODOLOGY used
  3. change in cie’s OPERATIONs
  4. change of valuation MODEL
  5. material events
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9
Q

OSFI AA

Contrast
PEER REVIEW and AUDIT
of AA’s work

A

AUDIT : ensure that financial statement (as a whole) has no material misstatement

PEER REVIEW : assess safety and soundness of insurer (at a more granular level)

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10
Q

OSFI AA

8 elements the PEER REVIEW WRITTEN REPORT on the work of AA should include

A

1) DESCRIPTION of work done by Reviewer
2) TIMING of work
3) MATERIALITY LEVEL used
4) STATEMENT OF OPINION about AA’s compliance with AAP
5) observations about changes in methodology and assumptions
6) acknowledgment that no additional material changes should have been made
7) list of recommendations
8) short description of relationship with the AA

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11
Q

OSFI AA

PRE-RELEASE vs POST-RELEASE peer review.

Which one for:
Financial statement?
AAR?
Future financial condition report?

A

–pre-release–
peer review PRIOR TO RELEASE of AA’S WORK
Peer reviewer must prepare the report and opinion before AA report
–post-release–
peer review AFTER THE RELEASE of AA’s WORK

--Financial statement--
pre-release
--AAR--
post-release
--Future financial condition report--
pre-release
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12
Q

OSFI AA

7 criteria to determine whether a peer reviewer is OBJECTIVE

A

1) not an employee in last 3 years
2) no direct interest in company (not a shareholder)
3) may have an indirect interest
4) peer reviewer may not work in same consulting firm as AA
5) if consulting firm member involved in financial statements, member of same firm can be involved if not also involved in the work.
6) only provide advice on changes of methodologies and assumptions as part of the peer review work
7) encouraged not to use a peer reviewer also a member of the external audit team (however acceptable for small companies)

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13
Q

OSFI AA

5 OSFI’s expectations when selecting peer reviewer.

A

1) ONE peer reviewer for cie as a whole
2) have same qualifications as AA
3) have sufficient experience with the work (incl. work in 2 unrelated companies)
4) notify OSFI in writing after hiring the peer reviewer (and provide reasons for change in reviewer).
5) have no relationship with AA or with insurer

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14
Q

OSFI AA

4 responsibilitites of AA on valuation of policy liabilities

A

1) opine that valuation is in accordance with AAP
2) include selection of appropriate methodologies and assumptions
3) require to make the AAR on the policy liabilities
4) opine whether annual statement presents fairly the results.

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15
Q

OSFI AA

Discuss change of reviewer of AA work

A

Reviewer should be changed at least once every 2 cycles (6 years)

Member of the same firm is acceptable for new peer reviewer

Should notify OSFI in writing of reason for the change

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16
Q

OSFI AA

Responsibilities of AA on reporting current and expected financial condition

A

Report to directors each FY on current and expected financial condition

DCAT report based on prior year end financial position or more recent

Copy of report to be sent to OSFI within 30 days of presentation

17
Q

OSFI AA

Responsibilities of AA on reporting matters requiring modifications

A

Report to CEO/CFO (cc Board) on any MATERIAL ADVERSE EFFECTS on financial condition requiring rectification

If suitable actions not being taken to rectify, AA must send a copy of report to SI and advise Board that it has been done

18
Q

OSFI AA

OSFI’s expectation when an employee of external audit firm peer reviews AA’s work that is subject to Audit?

A

expects that peer review be completed before audit opinion.

peer review and audit should be performed under 2 SEPARATE ENGAGEMENTS

19
Q

OSFI AA

5 disclosure to make in the cie’s upcoming AA report upon APPOINTMENT OF NEW AA

A

date of appointment of new AA

date of resignation of previous AA

Date OSFI was notified of appointment

List of AA’s qualification

Confirmation of communication with previous AA regarding reason of resignation or revocation

20
Q

OSFI AA

Timing of Peer Review:

AA’s work
Material change affecting the valuation
Financial condition

A

–AA’s work–
at least once every 3 years

–Material change affecting the valuation–
every year

–Financial condition–
every 3 years