mix Flashcards
reasons for caps on non-pecuniary damages (Trilogy Ruling)
CAPS
- keep Cost low, avail & afford
- Awards are limitless
- Predictability of awards
- Social burden
identify exceptions to Trilogy decision (caps removed)
- sexual abuse
- defamation
- negligence causing financial loss
because no evidence that these exceptional cases would increase cost of insurance or social burden
define J&S liability
plaintiff may recover any or all damages from any or all defendants regardless of share of liability
proposed reform of J&S
FREe
- Fund
- Replace with proportional liability
- Eliminate J&S from non pecuniary damages
advan & disadv of J&S reform
adv: discourages search for deep pockets and decreases costs
disadv: there is a cost to determining proportionate liability, parties would tend to argue for lower percentage
federal areas of exclusive authority
RBC BAT
- Regulation of trade and commerce
- Banking
- Criminal Law
- Bankruptcy and insolvency
- Aliens & Naturalization
- Taxation
areas and matters under provincial insurance legislation and regulation
contract matters: policy contents/ terms/ prem payment
transaction matters: AUC: agent licensing, unfair practices, claims handling
define materiality
an omission/under/over statement is material
if the actuary expects it to materially affect the user’s decision making or reasonable expectations
chars of an insurance company that may affect materiality
F-STARS
financial strength
size of entity
type of business
access to capital
net retention
stage of organization life cycle
FARM and RSP operational difference regarding rates
FARM- set by FA
RSP - uses rate of ceding company
objectives of peer review
AAR
Assist OSFI in assessing insurer safety and soundness
Assist AA on independent advice and professional development
Raise confidence in AA
required management action if capital available falls below internal capital target
if this happens or is expected within 2 years, notify OSFI and submit a plan to restore capital to internal target level reasonably quickly
purpose of stress testing
CCRL
- complement to other risk management tools
- capital management support
- Risk identify and control
- liquidation improve
considerations in adjusting an insurer’s rating based on its stressed BCAR score
FFHR
financial flexibility
frequency of severe exposure
historical volatility
risk management
arguments in support of using credit scores
statistically significant: high cs individuals have lower claim costs, removing cs will not change aggregate premium collected
has qualities of a good rating variable: easy to calculate, objective, verifiable
arguments against using credit scores
uhap
unfairly discriminatory
high cs insured often pay small claims out of pocket so their true costs may be understated
accuracy
privacy concerns
subsequent event definition
an event
of which an actuary first becomes aware
after the calculation date
but before report date
criteria a government insurance should satisfy
- is it welfare or insurance
- is it efficient
- is it necessary
why do insurers maintain credit ratings with rating agencies?
- agents are wary of unrated insurers
- 3rd party rely on ratings for solvency assessment
- efficiency: agents uws and regulators dont have expertise to do their own rating
define compensatory basis in the context of income replacement
- refers to basis for compensating loss of income
- basis can be either prior net or gross income
- income replacement is a percentage of this basis
- current uses gross
- gross ignores taxes and work related expenses that donot occur when not working so potential of over compensating
can CFO be AA?
yes if
- audit committee writes to OSFI that duties of CFO&AA can be adequately and independently performed
- OSFI authorizes appointment
examples of federal regulation/legislation regarding insurer solvency
areas under federal insurance regulation
CAR PRICE
- Calculation of Assets and Reserves
- Protect phs
- Regular reporting
- Investments
- Conditions for Entering business
OSFI expectations regarding an AA
AA must be a Canadian profession with Canadian experience
Exp:
- 3 years of Canadian experience in the last 6 years, at least 1 year in valuation
- experience with CIA SOPs, insurance legislation and regulation
Professionalism
- must maintain professional designation requirements
- no adverse findings with CIA
List of peer review work
i AM AA DIE MAF
- Assumptions and Methods
- did AA use AAP
- did AA document
- Internal/external changes
- MCT/BAAT
- examine Adequacy
- FCT scenarios
identify financial resources for covering PML for earthquake exposure
CREC
- Capital and surplus (max 10%)
- Reinsurance
- Earthquake reserves
- Capital market financing
describe board vs management responsibilities regarding stress testing program
BoD;
- ultimate responsibility of program
- ensure implementation of program by management
- aware of key findings
Management
- Implement and manage stress testing program
- develop and implement risk mitigation strategies
credit score use: regulator’s concern in economic crisis
on agg prem: an unwarranted increase. A new rating variable alone should not increase aggregate premium
on ind prem: a distributional shift that doesnot reflect true cost differences
actuary’s response on regulator’s concern of using cs
agg prem: can apply obf to reverse agg premium
ind prem: stop using temporarily, redo classification after economy stabilizes
key principles of risk transfer assessment
QQ- PIA
transfer risk using QQ on PIA tables
- use quantitative and qualitative approaches depending on info available
- use Professional judgement
- check risk transfer at Inception of contract
- consider overall Agreement
types of terms set in advance risk limiting features
- adjustability of reinsurance premiums or commissions
- pre set limits on timing of loss payments from reinsurer to insurer (removes timing risk)
- counterparties ceding back to original cedant
exs of Experience Based Renewals risk limiting features
- future terms based on past experience and reinsurer guaranteed to recover losses
- forced renewals if the contract is in deficit
why may efficiency of government insurance be overstated
other govt departments may already be performing services normally provided by insurer but the cost of these services may not be included in expenses
agriculture- what is the federal requirement for self sus
956152580
for all base and adverse scenarios
- calc 95th percentile of the fund balance at the end of 6th year
- rerun the scenario with that starting point
then the program is self sus if deficit recovery occurs
- within 15 years on avg and
- within 25 years with 80% prob
objective of FA
ensure auto availability for all owners and licensed drivers who are unable to obtain coverage through the voluntary market
FARM and RSP admission difference
- only if when broker cant place risk with voluntary company
- use uw rules of ceding company
minimum requirements for rsp transfer eligibility
- PAA only
- cant be eligible for FARM
- policy must satisfy statutory minimum coverage requirements
- insurer must follow proper classification and rating and provide documentation
- insurer must use approved rates
prohibited risk classification elements
CCONES
- claims where less than 25% at fault
- credit history
- occupation with exception
- net worth
- employment
- salary
potential reforms to Canada’s plaintiff friendly tort system
JCCV
- joint and several replace with proportional
- comprehensive income gross to net
- collateral disclose (sick pay and disability)
- vicarious liability eliminate
IBC’s guidelines on use of credit info
CAARA Choreographs a LAP Dance on Classical music
- Consent
- Adverse Selection
- no Refusal
- Accuracy
- Cannot quote/deny/cancel based solely on credit
- Legislation
- Appeal
- Privacy
- Double count
- Complaint
reporting requirements of AA to BoD
- provide report on financial position annually
- provide report on financial condition when directed by OSFI
reporting requirements of AA to CEO
- report on Material Adverse Events that require rectification
describe continuum of rate regulation approaches
- active regulation
- moderate rate regulation
- Competitive
action items in ON’s five part action plan for addressing the unfair delivery of benefits
SCIL$S
structural flaws/ cat injuries/ Lawyer/cash not care/ smart regulation
difference between external audit and peer review
audit checks if fs is free from material misstatement as a whole, uses CICA standard
peer review reviews AA’s FS at a more granular level, uses CIA standard
Peer Reviewer Doesnot Care to
- Perform detailed Recalculation
- Data verification
- Controls verification
key principles of managing earthquake exposures
MR.PDF
models
risk management
PML
data management
financial resources and contingency plans
non modelled exposures when calculating PML
- exposure growth between date of data and relevant exposure period
- consider adequacy of ITV
- consider Guaranteed RC
- increased seismicity after large event 地震活动性
disclosures required by new AA in next AAR
DQC
Date
Qualification
Communication
ORSA key elements
RRIMO
Risk identification and assessment
Relate risk to capital
Internal controls and objective review
Monitoring and reporting of risks
Oversight
similarities between dcat and orsa
both concerned with risk identification and control/ capital requirements
both submitted to BoD and regulators
diff between dcat and orsa
DCAT uses CIA SOPs
ORSA uses OSFI guidelines
- quantitative only/qualitative and quant
- by AA/ management responsibility
adv of orsa over dcat
- includes all material risks
- uses stress testing to set ICT
- qual and quant
- admits assessment of internal controls
elements of strong cat risk management
- cat modelling
- data quality
- aggregate loss exposure
- MML (measure monitor limit exposure on a continuous basis)
describe “use periods” related to SPF9 (0123)
0: personal use, not logged into TNC
1: logged into TNC but has not accepted a ride
2: accepted a ride, en route to passenger
3: passenger in vehicle
PD optional in 23, no in 1
AB TPL 123
identify coverage trigger that begin and end accident benefits coverage under SPF9
begin: log in to app
end: log out or customer exit
drivers for recent increase in frequency and sev of cats
freq: climate change
sev: growth in population density and complexity of supply chains
purpose of AM Best natural CAT test
test financial condition of insurer after 2 major CAT events
IBC’s 5 objectives
SEP- DC D
Study legislation
Engage in research
Promote public understanding
Discuss general insurance
Collect and analyze Data
focus of Canadian Insurance regulation since Confederation
MOTHS
marketing: marketing integrity
ownership: encourage Canadian ownership
taxes: collection
honesty: honesty of intermediaries
solvency: keep insurer’s solvent to protect phs
how does federal legislation protect Canadian insureds from foreign insurance companies
foreign insurers must maintain sufficient assets in Canada and recovery from insolvency
why are uniform guidelines easier to establish than uniform legislation?
guidelines donot need to go through the legislative process
role of CCIR
- legislation axis: draft legislation/promote uniform ensure adequacy of provincial legislation
- practice axis: education and consumer protection
conditions for recovering under an indemnity policy
events must be covered
requires proof of amount of loss
define enquiring professional
a professional who relies on the work of another (responding professional) in the course of their own work
define responding professional
a professional whose work is being used by another
define non deferrable commission
commission not exclusively relating to and varying with the acquisition of premium hence not recoverable over the term of expired policy
communication requirements for enquiring professional with responding professional
notify responder that work is being used
notify responder regarding needs
request confirmation of responder’s appointment, professional standing and observance to standards
communication requirements for responding professional with enquiring professional
confirm work will be done
confirm appointment and professional standard
notify of any issues in meeting enquiry professional’s needs
considerations in estimating LIC/LRC
uw practices
claims handling practices
reinsurance
data processing system
accounting systems
define model
a practical representation of relationships among entities using fems concepts
define model risk
the risk that the user will draw inappropriate conclusion due to short comings of model or its use
circumstances an subsequent event must be accounted for
- material
- reflects an error
- makes the entity different relative to timing and purpose of actuary’s report
key principle of PML
Total expected Ultimate Cost
- includes considerations for data quality, non modelled exposure, model uncertainty, multi region exposure
reasons for government insurance
FECCS
filling unmet needs
efficiency
compulsory
convenience
social purpose
identify conditions for province to receive unreduced funding under Canada Health Act
CUPPA
- comprehensive:
- Universal
- Portable
- Public
- Accessible
define probable yield
expected yield per unit of exposure for a given producer, agriculture product and crop year
define self sustainability load
a load in rates to recover deficits and maintain surplus
base scenario definiton
a set of assumption on risk factors that are consistent with the business plan over forecast period
adverse scenario
developed by stress testing assumptions used in the business plan, looking specifically for risk factors that threaten financial condition
ripple effect
an event that occurs when an adverse scenario triggers a change in 1 or more inter dependent assumptions
discount rate
rate used to discount future cash flows which is consistent with timing liquidity and currency of underlying insurance contracts
reference portfolio
a portfolio of assets used to derive discount rates based on current market rate of return
chars of discount rate
reflect time value of money/characteristics of cf/liquidity of insurance contracts
consistent with market prices for financial instruments with similar cf
exclude factors affect MV but not CF of ins contracts
circumstances leading to the recognition of significant financing component with regards to policy chars and benefits to the parties that are part of the insurance transaction
recognized because policy premium is received by the entity more than a year prior to service being provided
the transaction thus benefits the entity as the ph finances the entity’s activity by pre payment of premium
how discount rate is selected when cash flows do vary with returns on underlying premiums
make value of liability cash flows equal the fair market value of underlying assets
regarding non financial risk, how is the measurement objective different under 27 and pre
compensation required by an entity to bear uncertainty and amount required to provide for the effect of uncertainty
considerations when estimating risk of non performance of a reinsurer
-financial strength
- history of claims and coverage disputes
- delays in payments and concentration risk
- collateral available to mitigate risk
under 17, how might insurance revenue for reinsurance contracts issued differ from earned premium?
seasonality: release of risk differs from passage of time
reinstatement prem: apply against insurance service expenses
ceding commissions on proportional reins treaties
questions AA should ask before taking responsibility for another person’s work
- is the work consistent with a reasonable interpretation of ifrs17 standard
- … with accepted actuarial practice in Canada?
- qualification confirmation and awareness work is used
- is the work similar to what AA would have done
- is AA able to judge the appropriateness of work
two component benefits to ON auto insurance
- no fault, accident benefits, provides benefits regardless of fault
- tort, BI, allows you to sue at fault driver
proposed reform to joint and several liability
eliminate js for non pecuniary damages
replace js with rule of proportional liability
fund creation for guilty parties who cant pay
adv and disadv of js reform
discourages search for deep pockets and decreases costs
cost to determine proportionate liability, parties tend to argue for a lower percentage
three insurance transaction matters under provincial legislation
agent licensing
unfair practices
claims procedures
federal government wants to replace all private and provincial automobile insurers by a single crown corporation, evaluate viability
ultra vires for the federal government. regulation of trade of commerce doesnt extend to a licensing agreement of a particular trade, as in the insurance reference case
provincial areas of exclusive authority
provincial taxes
civil property rights
hiring and supervising provincial employees
operating jails and hospitals
contrast liquidation and on going concern
liquidation: runoff of assets and liabilities, of interest to regulators of satisfying policy holder obligations
on going concern: continued normal operations, of interest to investors
principle based on rule based
principle based must be interpreted and applied, more flexible
rule based is with strict rules that have to be followed, easier to understand and to audit
adv of commutation (primary insurer, reinsurer)
p: removes reinsurance credit risk, decrease expense cost, receive cash flow right away
reins: give stability in the report for LT claims, savings in claims adjusting and admin costs, required after wind up
what is the ongoing role of actuaries concerning covid
follow guidance from regulatory bodies, monitor legal actions related to covid, report stats on AAR
2 approaches to account for time value of money when evaluating runoff of claim liab
- discounting: discount paid and unpaid from t to t-1
- subtraction: subtract ii earned during cy on assets that support liabilities
