Odomirok Ch 11: General Interrogatories

Question 1

2 Parts of General Interrogatories

Answer 1

• Part 1: Common Interrogatories

- Part 2: Questions specific to the type of insurer

Question 2

Purpose of Common Interrogatories section:

Answer 2

Give more details about the company’s:

• operations
• business practices
• types of internal and external controls in place

Question 3

Items discussed in General section of Common Interrogatories:

Answer 3

• 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

Question 4

List some examples of insight that users can get from the General section of the Common Interrogatories:

Answer 4

• If it has suspended licenses or does not comply with regulations, perhaps it lacks internal discipline
• If it has high commission levels, maybe it is sacrificing its commission in order to maintain or grow business

Question 5

What details does the General Section disclose about the latest financial exam:

Answer 5

• Date of the latest exam
• Date through which the statements were evaluated
• Release date for the examiner’s report
• Name of department performing the exam
• Whether the insurer has complied with all adjustments & recommendations from the examination report

Question 6

What questions do the interrogatories contain about the board of directors:

Answer 6

• 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

Question 7

Purpose of Financial interrogatories:

Answer 7

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

Question 8

What areas do the Investment interrogatories question:

Answer 8

• Assets & investment decisions
• Security lending programs & associated collateral
• Hedging programs
• Mandatory convertible stocks or bonds
• Compliance with NAIC “Purposes & Procedures Manual”

Question 9

How do the interrogatories help identify if an insurer is using finite reinsurance:

Answer 9

The insurer needs to answer an interrogatory that asks if it ceded reinsurance that:

• Resulted in an underwriting gain/ loss of more than 5% of the prior surplus; or ceded premiums/ loss reserves of more than 5% of surplus
• Was accounted for as reinsurance (not deposit)
• Had at least one of the following features: Duration of at least 2 years and non-cancelable/ Limited cancellation provision/ Aggregate stop loss coverage/ Either party has the right to commute for a reason other than the downgrade in the credit rating of the other party/ Ability to report or pay losses less frequently than quarterly/ Delayed `

Question 10

What disclosures are in the reinsurance summary supplemental filing?

Answer 10

• The impact to the Balance Sheet and Income Statement had the contracts been
  excluded
• A summary of the applicable terms of the contract that generated the affirmative
  response
• The reasons that management entered into the contract, including the expected
  financial gain