SOA-COPFLR Flashcards
identify the purpose of the SAO (Statement of Actuarial Opinion) (3)
OPINION:
- provide appointed actuary’s OPINION on reserve amounts for items in SAO scope
INFORM:
- INFORM readers/regulators of significant risk factors regarding reserves
ADVISE:
- ADVISE whether risk factors could lead to MAD in reserves (MAD = Material Adverse Deviation!!)
identify intended users of the SAO (5)
- regulators
- Board of Directors
- management
- investors
- general public
describe the organization of the SAO (Statement of Actuarial Opinion) (6)
4 Required Sections (ISOR): • 1. Identification • 2. Scope • 3. Opinion • 4. Relevant Comments 2 Exhibits: • Exhibit A: RECORDED AMOUNTS for items in scope • Exhibit B: DISCLOSURE ITEMS regarding NET reserves in scope
identify reasons for an exemption from the SAO (Statement of Actuarial Opinion) requirement (4)
Size:
• (< $1m annual GWP) and (< $1m gross reserves @ year-end)
LOB: certain Lines of Business are exempt
Supervision: exempt if insurer is under supervision
Hardship: exempt if insurer is under financial hardship (cost of SAO is a burden)
• cost > 1% of CY capital & surplus (from latest quarterly statement)
or
• cost > 3% of annual GWP (projected from last quarterly statement)
describe the IDENTIFICATION section of the SAO (4+)
• information about appointed actuary
- name/title (that's super-obvious!)
- WHO made the appointment (Ex: Board of Directors)
- AFFIRMATION of qualifications
- RELATIONSHIP to company
- DATE of appointment
• intended purpose/usersdescribe the SCOPE section of the SAO (5)
identifies the following: (see also the section headings in chapter 3 of the COLFR source reading)
- reserve items in opinion and basis of presentation
- accounting basis for reserves
- intercompany pooling
- review date (also defined in ASOP 36)
- data sources (who, where), consistency & reasonability, reconciliation to Schedule P
identify some reserve items (3) & disclosure items (6) in the SCOPE section of the SAO
reserve items:
- loss & LAE reserves
- retroactive reinsurance assumed reserves
- unearned premium reserves for long-duration contracts
should disclose: (see section 3.2 of the COPLFR source reading)
- whether reserves are discounted or undiscounted
- basis for risk margin (or state there is no risk margin)
- gross or net of recoverables (reinsurance, sa/vage& subrogation)
- whether uncollectible recoverables were considered
- types of expenses included in LAE (DCC, A&O,..)
→ and anything else the actuary thinks is necessary to understand the analysis
define ‘review date’ for the SAO
he date subsequent to the valuation date through which material information known to the actuary is included in forming the reserve opinion
NOTE:
- the ‘review date’ is NOT the same as the ‘signing date’
- the ‘signing date’ comes ON/AFTER the ‘review date’
- info arising between ‘review date’ & ‘signing date’ is NOT relied on by the actuary
describe the ‘data reconciliation statement’ in the SAO
it states: the actuary either performed OR reviewed reconciliation to Schedule P
describe the contents/language of the OPINION section of the SAO (4)
In my opinion, on Exhibit A:
[A] LAWS:
- reserves meet insurance laws in domiciliary state
[B] STANDARDS:
- reserves computed in accordance with actuarial standards
[C] TYPE of OPINION: R, I, E, Q, or N
- reasonable / inadequate / excessive / qualified / none
[D] MISCELLANEOUS
- other loss reserve items, work of others,..
define reasonable actuarial opinion
recorded reserves are WITHIN actuary’s reasonable range of unpaid claim liabilities
define inadequate / deficient actuarial opinion
recorded reserves are BELOW actuary’s reasonable range of unpaid claim liabilities
define excessive / redundant actuarial opinion
recorded reserves are ABOVE actuary’s reasonable range of unpaid claim liabilities
define qualified actuarial opinion
actuary is UNABLE TO ISSUE an opinion on certain material items (reserves could still be within actuary’s range)
define no opinion actuarial opinion
actuary is UNABLE TO CONCLUDE that reserves are reasonable
