TIA Section A - Odomirok 10 Flashcards
Under what circumstances does an insurer need to make disclosures about unsecured reinsurance recoverables
3️⃣ If the recoverables from the reinsurer exceed 3% of surplus
What disclosures does the insurer need to make about unsecured reinsurance recoverables
📋 Name/Paid losses billed but not yet collected, ceded reserves, ceded unearned premiums
List some questions the actuary may have if the insurer has material credit risk exposure to a reinsurer
(unsecured recoverable)
👮🏻Why wasn’t security provided?
💸 Are there concerns about the financial health of either the insurer or reinsurer?
🌪 Was the large amount of recoverables caused by a catastrophe?
🙍🏼♂️ Are all of the unsecured recoverables concentrated with one reinsurer?
List two uses of the Disputed Balances note
🕵🏻♂️ Identify credit risk
🕵🏼 Identify insurers that try to over recover from reinsurers
List some questions that the actuary may have about the disputed balances
🗣 What is the issue causing the disagreement?
👥 Is the disputed amount material to either the reinsured or reinsurer?
⚖️ Are there legal options available?
Reasons that users would be interested in the Reinsurance Assumed and Ceded note
💍 Identify situations where the insurer is engaging in reinsurance contracts with commissions designed to manipulate its surplus
🙅🏼♀️ Helps derive the impact to surplus if the policy(s) are cancelled
List some questions that the actuary may have about the Uncollectible Insurance note
🤷🏼♀️ Why is the reinsurance uncollectible?
📑 Is there other recoverable that may also be uncollectible for similar reasons?
🕰 How long had it taken the company to write off the uncollectible reinsurance that had been disclosed?
Define a commutation
Settlement between an insurer and reinsurer to discharge all remaining obligations
Describe two ways in which commutations will distort the financial statements
💳 The payment from the reinsurer is a negative paid loss
💸 The loss reserve is increased
Describe the accounting treatment of retroactive reinsurance
📃 The ceded reserves are recorded as a negative write-in item in the balance sheet
📈 Any gain is recorded as
* other income in the income statement
* special surplus in the balance sheet
Required disclosures in the Notes about retroactive reinsurance
- Reserves transferred
- Consideration paid
- Paid losses reimbursed
- Special surplus generated
- The reinsurers involved
Reason it is important to disclose retroactive reinsurance
Helps verify that the insurer is appropriately accounting for the retroactive reinsurance and to better understand its impact
What do the Notes needs to disclose about reinsurance accounted for as a deposit
Include a schedule that shows the historical change to the deposit/liability balance since the inception of each contract
What do the Notes need to disclose about Certified Reinsurer Rating Downgraded or Status Subject to Revocation
Discloses the impact if the collateral has not been received by the filling date
What does the change in Incurred Loss & LAE note disclose
- Amount of the change
- Segments/lines that lead to change
- Reason for the change
Reasons the Change in Incured Loss & LAE note is important:
- Changes can distort the current year’s underwriting income
- Recurring material changes may indicate that there are issues with the reserving process.
Two reasons that Premium deficiencies are rare
- Most policies charge sufficient premium to cover the expected losses and expenses
- A particular segment within a group that has a deficiency may be offset by the surplus of another segment
Two ways to account for premium deficiency
- Establish a write-in liability
- Reflect as part of the UEPR
What does the insurer need to disclose about premium deficiencies in the Notes
- The size of the deficiency
- Whether investment income was considered
What does the insurer disclose about discounting in the notes:
- Whether it uses tabular discounting
- Basis & assumptions supporting tabular discounts
- Whether it uses nontabular discounting
- Basis & assumptions supporting nontabular discounts
- Whether there has been a change of assumptions used to calculate the discount.
Provide some reasons why the actuaries should become familiar with the Discounting note
- Different companies use different discounting practices
- The use of non-tabular discounts is a sign that the regulator may have solvency concerns about the insurer
- The actuary has to disclose and describe discounting in the SAO
Two reasons that it is necessary to disclose the potential asbestos/environmental exposure
- The reserves have developed adversely over the last few decades
- There is a lot of uncertainty associated with the reserves
What does the insurer need to disclose about the asbestos/ environmental exposure in the Notes
- Lines of business affected
- Nature of the exposures
- Reserving methodology
- Table that contains 5 years of data
- Pure IBNR
What does the 5yr table from the asbestos/ environmental exposure disclosure mention:
Beginning reserves/ Incurred loss/ CY payments / Ending reserves * Pure IBNR.
What is described in the Summary of Significant Accounting Policies note
- The source of the accounting rules used to construct the Annual Statement
- Any exceptions that were made to the above rules and basis of the exceptions
- Additional detail on the insurer’s significant accounting policies
(source: typically the NAIC Accounting Practices and Procedures Manual)
Define Type 1 (Recognized Subsequent Events)
Events that provide additional detail on conditions that existed at the accounting date
How should Type 1 Events be accounted for
These events should already be reflected. Disclosure only be needed if it would prevent the statements from being misleading.
Define Type 2 (non-recognized subsequent events)
Events that did not exist at the accounting date
How should Type 2 events be accounted for
These events should not be included in the financials. They should however be described in the note if they could have a material impact
What do the Notes disclose about intercompany pools
- Members of the pool
- Lead company
- Pooling percentage of each participant
What do the Notes disclose about Structured Settlements
- Total amount of the structured settlement payments for which the insurer could be held liable
- If the remaining payments from a single life insurer exceeds 1% of surplus, the name of the life insurer and associated remaining payments
What do the Notes disclose about High Deductible policies
- the reserve credit that the insurer has recognized for the unpaid claims
- The amount billed but not yet collected for the paid claims
