OSFI.AA Flashcards

1
Q

What are legal requirements of the appointment of an AA (8)

A
  • insurer must appoint AA
  • insurer must notify OSFI of the appointment
  • AA must be FICA
  • AA can’t be (CEO, COO) or similar without the authorization from OSFI
  • AA can’t be CFO without audit committee permission (audit must certify AA and CFO duties can be performed competently & independently)
  • insurer must notify OSFI if BoD revokes AA’s appointment
  • outgoing AA must write report to BoD and OSFI on circumstances & reasons for leaving
  • new AA must review outgoing AA’S report within 15 days (if incoming AA does not receive report within 15 days, they may accept appointment regardless)
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2
Q

Summarize the roles & responsibilities of an AA (7)

A

perform valuation of policy liabilities at year-end using AAP

5 reports:
- Appointed actuary report
- financial position report (annually, send to BoD)
- financial condition report (complete when directed by OSFI, send to BoD & OSFI)
- material adverse event report (and send to BoD, CEO, CFO)
- policyholder fairness report (annually, assesses fairness with which policyholders are treated regarding dividends, bonus, other benefits)

final opinion & memo (concerns parts of financial statements requiring discretion or significant calculations/judgments)

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3
Q

Main AA qualification + 3 rules

A

main qualification: FCIA
3 rules:
- perform professional services with integrity, competence, skill and care
- perform professional services only when qualified to do so
- meet all applicable SOPs

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4
Q

4 qualifications that OSFI expects in assessing the suitability of an AA

A
  • has at least 3 years of Canadian experiences in the last 6 years with 1 year in valuation
  • has experience with CIA SOPs and Canadian legislation and regulation
  • must maintain professional designation requirements
  • no adverse findings with CIA disciplinary tribunal
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5
Q

What are the objectives of a peer reviewer (3)

A
  • assist OSFI in assessing insurer’s safety and soundness
  • assist AA by providing independent advice, being a source of professional development
  • raise confidence in AA with management, public, regulators
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6
Q

Identify duties of the external peer reviewer (4)

  • see notes for more
A

Review-did-review-did

  • review reasonableness and appropriateness of AA’s assumptions & methods
  • did the AA use Accepted Actuarial practice in performing the valuation
  • review all material internal and external changes regarding the valuation
  • did the AA report accurately document assumptions & methods used in valuation
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7
Q

Identify 3 examples of material changes that the peer review is expected to consider

A
  • system change
  • change in valuation methods
  • change in valuation assumptions
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8
Q

Describe differences in the responsibilities of an external peer reviewer and an external auditor (3)

A
  • peer reviewer do not do any recalculation but auditors do
  • peer reviewer do not verify data or controls but auditors do
  • peer reviewer uses CIA SOP guidelines while auditors do not
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9
Q

Content of the peer review report (5)

A
  • description of the work done
  • recommendations for further work
  • relationship with AA
  • materiality level used
  • observations of changes in assumptions and methodology
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10
Q

How often is a peer review performed when there is no material changes to the valuation

A

every 3 years

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11
Q

How ofter is a peer review performed when there have been material changes to the valuation

A

annually

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12
Q

Qualifications standards of the peer reviewer (2)

A
  • same as the AA (FICA, Canadian experience, no adverse findings from CIA tribunal)
  • need to have exposures to 2 or more different (unrelated insurers)
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13
Q

Describe OSFI’s peer reviewer objectivity conditions (7)

A

==> NOT ALLOWED:
- an employee or AA for the company/subsidiary in past 3 yrs
- shareholder or direct financial investment in company
- from same consulting firm as AA
==> NOT ALLOWED:
- outside non-work discussion with AA
- this means the AA and peer reviewer cannot be friends or drinking buddies!
==> PERMITTED:
- peer reviews can have an INDIRECT financial investment in the company
- peer reviewer CAN be from consulting firm doing financial statements for the company (if not involved in that work)
- peer reviewer CAN be from company’s audit firm (but this is not encouraged)

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14
Q

How often should a peer reviewer be changed

A

every 2 cycles (6 years), may again be peer reviewer after 1 cycle has passed

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15
Q

Identify reasons for periodic changes of peer reviewer (2)

A
  • enhance objectivity
  • increase educational value to AA
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