Group Chapt21 -Fin Reporting

Question 1

Canada group Statutory reporting

Answer 1

1. To complete Life-1 annual statement
2. File with Office of the Superintendent
3. Only publish based on statutory accounting. Two different bases is not allowed
4. As of 2011, required to report under IFRS rather than CICA standards
   
   4. 1 Increased transparency, consistency, and role of actuarial professional judgement
   5. 2 IFRS 7 Disclosure
   6. 3 IFRS 4 related to insurance
5. IFRS 4
   
   5. 1 Portion relating to valuation allows for wide use of professional judgement
   6. 2 Allows Canadian GAAP standards to continue
   7. 3 The Canadian Asset Liability Method (CALM) is mandatory until IFRS 4 phase 2 become final
6. CALM reserves equal value of assets sufficient to pay obligations
7. Separate provision for adverse deviation (PFAD)

Question 2

Discuss US GAAP and how to modify Stat to produce GAAP

Answer 2

1. GAAP standards provide
   
   1. 1 consistent framework for comparing results of different entities
   2. 2 Accurately reflect earnings during a period
   3. 3 focus on the income statement
   4. 4 GAAP attempts to match revenues and expenses
   5. 5 determine value of insurer on a going concern basis
2. Modification to statutory to produce GAAP
   
   2. 1 Removal of some conservatism in reserving
   3. 2 Full recognition of deferred taxes; recognition of market value of most assets
   4. 3 Recognition of lapses in reserves; capitalization of DAC
   5. 4 Removal of the AVR and IMR (interest maintenance reserves)

Question 3

GAAP financial reporting Canada

Answer 3

1. In Canada, statutory reporting is done using IFRS and Canada GAAP for reserves
2. Companies file quarterly and annual financial reports with OFSI
3. Actuarial Report
   
   3. 1 Description of all the assumptions and changes
   4. 2 Signed statement affirming compliance with Standards of Practice
   5. 3 Signed copy of opinion of the actuary
   6. 4 Any other information that Superintendent may require
4. Minimum Continuing Captial and Surplus requirement (MCCRS)
   
   4. 1 Signed by appointed actuary and a senior company officer
   5. 2 similar to RBC in Us
5. dynamic capital adequacy testing (DCAT)
   
   5. 1 require on an annual basis
   6. 2 company’s financial position projected under adverse scenarios
   7. 3 scenarios are basic risks and ripple effective
   8. 4 DCAT presentation to board and senior management
   9. 5 actuary must conform to standard of practice on DCAT

Question 4

US group STAT reporting

Answer 4

1. Types of group insurance financial reporting - statutory
   
   1. 1 to complete NAIC annual statement
   2. 2 report on the life, health, or property-casualty annual statement blank
   3. 3 focus to demonstrate solvency
   4. 4 conservatism on the asset side: non-admitted assets not allowed in determination of solvency, NAIC prescribes asset values, DAC not allowed
   5. 5 Conservatism on the liability side
      
      1. 5.1 minimum morbidity and mortality tables, Max interest rates, AVR and IMR
2. Actuarial Option Based on items in
   
   2. 1 Exh5 (life and annuity reserves), Exh6 (health reserves), Exh 7 (deposit-type contract reserves), Exh 8 (claim liabilities), page 3 (total liabilities and surplus)
3. Requirements based on:SVL & AOMR
   
   3. 1 Actuarial assumptions and methods are specified
   4. 2 Valuation actuary concept more freedom to ensure reserves adequate
   5. 3 Continued departure anticipated in principles based reserve
4. ASOPs that relate to actuarial opinions for group insurers
   
   4. 1 ASOP 7 life, health, or P&C insurer cash flows
   5. 2 ASOP 22 statements of opinion based on asset adequacy analysis
   6. 3 ASOP 28 Statements of actuarial opinion regarding health liabilities and assets

Question 5

Tax reporting US and Canada

Answer 5

1. US
   
   1. 1 Required by taxing authorities in determinations of tax liability
   2. 2 Statutory reports starting point for tax reporting
   3. 3 interest rates for tax reserves exceed statutory rates
   4. 4 DAC tax delays recognition of expenses
      
      1. 4.1 Merely a percentage of in force premium
      2. 4.2 Capitalized costs recouped over a ten-year period
2. Canada
   
   2. 1 federal income tax, investment income tax, provincial income tax, tax on capital (federal and provincial), general business taxes, and premium
   3. 2 federal income tax starts with statutory, then adjusted
      
      2. 2.1 changes in actuarial reserves
   4. 2.2 reserves for incurred but unreported claims
   5. 2.3 deferred policy acquisition costs
   6. 2.4 experience rating refunds
   7. 3 investment income tax paid on some investment income

Question 6

US and Canada

1. Managerial reporting
2. Policyholder reporting
3. Provider reporting

Answer 6

1. Managerial reporting
   
   1. 1 provide impact of management decisions on the value of insurer
   2. 2 starts from GAAP making adjustments
   3. 3 Improve communication of results to management
2. Policyholder reporting US and Canada
   
   2. 1 Policyholders (the group, not individual certificate holders) need information to complete their own financial reports
   3. 2 Canada similar to US, except no ERISA (see below)
   4. 3 In US, ERISA requires Form 5500 to be filed annually
3. Provider reporting US
   
   3. 1 Provider’s reimbursement contingent upon certain events
   4. 1.1 utilization or average cost
   5. 2 retrospective risk-sharing payment create a need for reporting
   6. 3 Provider may need to establish reserves in their own statements
   7. 4 Medical management reporting
   8. 4.1 include reporting to regulatory entities
   9. 4.2 industry groups
   10. 4.3 reporting to providers
   11. 5 provider Canada: there is no reporting requirement

Question 7

Considerations for Financial reporting

Answer 7

1. Alternative funding arrangements
   
   1. 1 administrative service fee a material element
   2. 2 Retrospective premiums create due and unpaid premiums
   3. 3 Retrospective experience rating refunds require calculation of refund reserve or a rate credit reserve
   4. 4 reserve less agreement
      
      1. 4.1 insurer must still set up claims reserves - terminal premiums offset reserves as an asset
2. Policyholder accounting
   
   2. 1 if policyholder participates in insurance risk need financial reporting
   3. 2 Gain = (collected premium - pooled premium) - (paid claims - pooled claims) - (ending claim reserve - beginning) - (expense, risk and profit charged-interest credited)
   4. 3 increasing claim reserve merely decrease the refund reserve
3. Regulatory requirements
   
   3. 1 laws of each state specify reserve assumptions and methodologies
   4. 2 NAIC AOMR- requirements for actuary signing statement of opinion
   5. 3 state specific risk pool assessment
   6. 4 ACA reporting requirements: helps comparative effectiveness research, helps administer penalty taxes
4. Canada prescription drug industry pooling

Question 8

Considerations for Financial reporting

Canada prescription drug industry pooling

Answer 8

1. Quebec
   
   1. 1 Persons having no access to group coverage must adhere to Quebec Prescription drug insurance plan
   2. 2 Insurers pool drug claims > annual thresholds
   3. 3 Must report enrollment and claim data on an annual basis
2. EP3 program (extended care policy protection plan)
   
   2. 1 Insurers must place large pharmacy claims in their own self-administered pool
3. National Industry Drug Pool (NIDP)
   
   3. 1 To qualify for the pool, certificate must exceed $50K for 2 consecutive years

Question 9

Reinsurers require ceding company to periodically report:

Answer 9

1. Administration of the treaty (number of lives, amounts reinsured)
2. Premium billing and collection data
3. Exposure in unusual types of risks, large amounts of risk
4. Copies of annual reports
5. Pricing assumptions
6. Reserve setting assumption and amounts