HAF AND INDEPENDENT ACTUARY

Question 1

What are the main responsibilities of the HAF?

Answer 1

1. Financial oversight
2. Risk management
3. Policyholder fairness
4. Product governance
5. Professional responsibility
6. Transaction Assessment

Question 2

Financial oversight

Answer 2

regulator
- Sign off the returns that go to the regulator
- Review ORSA ensure that projections and stress scenarios are appropriate
Solvency vibes
- Monitor solvency, explain any deviations, suggest improvements
- Ensure that the MCR, SCR and TP are all adequate
- evaluation impact of premiums on capital requirements (new business strain)

Data
- Ensure that data is of good quality and that assumptions, models and methods used are appropriate

Question 3

Risk management

Answer 3

• monitor risks that threaten PH obligations
• ensure risk management of assets and liabilities and underwriting is appropriate
• ensure adequate levels of risk transfer (reinsurance is appropriate)
• with capital models, ensure that internal model/formula is appropriate
• review scenarios, stress tests for key risks

Question 4

PH fairness

Answer 4

• monitor PH RBEs
• advise on fair bonuses to give PH with with-profits policies
• review charges, surrender values and penalties
• ensure that there is fairness between different PH groups and generations.
• ensure unit-linked and smoothed bonus fund valuations are equitable
• monitor BSR
• review application of discretionary policy features

Question 5

Product governance

Answer 5

• ensure premiums are sufficient to cover future obligations, expenses and capital costs
• ensure new and modified products are actuarially sound
• review conditions, guarantees, options and surrender values
• ensure that there is alignments between product features and promises made in marketing materials
• review actuarial soundness of group business rating methodologies

Question 6

Professional responsibility

Answer 6

• provide regular opinions and advice to the board
• participate in board meetings when HAF reports are discussed
• separate between statutory and personal opinions
• follow ASSA Professional Code of Conduct
• identify and handle potential conflicts of interest
• consider broader impact beyond insurer interests (more public interest)
• raise any concerns with regulator when position of HAF terminates

Question 7

Transaction assessment

Answer 7

• provide opinions on when insurer wants to transfer block of insurance policies to another insurer
• evaluate M & As, scheme arrangments
• assess financial position post-transaction
• identify PH groups that might be disadvantaged by the transaction
• ensure transactions meeting statutory requirements
• manage conflicts of interest in transaction roles
• consider effects of alternative transaction structures

Question 8

What is the difference between HAF and Independent Actuary?

Answer 8

• HAF is an internal role with ongoing responsibility for actuarial functions but IA is just an external consultant there for a specific project
• Both work on “transaction assessment” in a way, but in different capacities
• Both must have appropriate knowledge and qualifications
• HAF provides an internal opinion to own company’s board and focus on how the transaction affects the insurer’s financial condition
• IA provides completely independent assessment and considers interests of all parties (insurer and affected policyholders)
• IA report submitted to regulator and made available to PHs
• HAF can provide information to IA, so they provide deep knowledge while IA provide impartiality

Question 9

What are the prerequisites to becoming an IA?

Answer 9

• must have relevant knowledge and experience and qualifications
• need to disclose any potential conflicts of interest (if unclear discuss with PA/ president of ASSA)
• put safeguards in place to protect IA/employer if done work for either party before
• request brief from PA outlining primary responsibilities
• IA must address key issues outlined in brief but not restricted to only those
• IA will only take instructions from PA and no other party
• if resign before complete must provide reasons
• if dismissed before complete PA must provide reasons
• find out if job offered and taken by someone else why they left

Question 10

What is the actuarial function responsible for? GOI 3

Answer 10

providing the board of directors advice on the following:
- the insurer’s investment policies and the valuation of assets;
- its solvency position, including a calculation of MCR for regulatory purposes;
- the ORSA , and the assumed management actions;
- the internal controls relevant to actuarial matters or the financial condition of the insurer;
- the actuarial soundness of the distribution of profits awarded to participating policyholders;
- the fair treatment of PH with regard to distribution of profits awarded to participating PHs (i.e. with-profits PHs);
- product development and design, including the terms and conditions of insurance contracts and pricing, along with estimation of the capital required to underwrite the
product; and
- the research, development, validation and use of internal models for internal actuarial or financial projections, or for solvency purposes as in the ORSA.