Odomirok 11 Flashcards
General Interrogatories section of A.S. and purpose
contains a series of questions that the insurer must respond to.
The purpose of the section is to:
Provide additional clarity to the users of the Annual Statement
Identify areas that need further regulatory review
Part 1, Common Interrogatories
general questions applicable to life, health and P&C insurers
Part 2
questions specific to the type of insurer (P&C)
COMMON INTERROGATORIES sections and purpose
give more details about the company’s:
operations
business practices
types of internal and external controls in place
sections: General Board of Directors Financial Investment Other
General section
asks questions about the following topics:
Holding company relationships
Latest regulatory financial exams
Excessive sales commission levels
Merger activity
Suspension of licenses
Foreign Control
Exemptions from required regulations
Whether senior management is subject to a code of ethics
General section also has to disclose
independent CPA and Appointed Actuary
latest financial exam
contains the state’s findings regarding the insurer’s reserve adequacy
Board of Directors
These interrogatories focus on the board’s role in overseeing the company’s operations. It includes questions regarding:
Role of the board in approving the purchase/ sale of investments
Does the company have a process in place to notify the board of conflicts of interest within senior management
Whether the permanent records of the board proceedings are retained
Financial
This first asks whether the financials were developed using an accounting system other than SAP. Since this has a very material impact on the numbers, it should be one of the first things that the users refer to.
These interrogatories help users understand: If the insurer has financial obligations that were not reported in the Annual Statement If the insurer has been providing significant financial support to its stakeholders/ affiliates
Investment
The questions focus on the amount of control that the insurer has over its operations; and its compliance with the rules.
Other
This contains questions about payments made to trade associations, service organizations, statistical or rating bureaus, attorneys & others regarding legislative/ regulatory matters. In particular, the insurer needs to list the names of any organizations that received over 25% of the total, so users can determine if it has a strong influence on a particular organization.
P&C INTERROGATORIES
These provide more information about the insurer’s exposures that are not readily determinable from the quantitative information available elsewhere in the Annual Statement
P&C interrogatories: relevant questions
Exposure to catastrophic events and excessive loss
The process used to calculate the PML (Probable Maximum Loss)
Level of reinsurance protection
If there are any limiting provisions within reinsurance contracts, guaranteed policies, and retrospectively rated policies
Any releases of liability under reinsured policies (where the company may have to reassume liability)
Exposure to warranty business (the adequacy of the UEPR would be important)
Finite Reinsurance
“reinsurance” that does not transfer underwriting or timing risk
should really be receiving deposit accounting
Finite reinsurance has been particularly important recently
because companies were manipulating finite reinsurance deals to increase their surplus
