TIA Section A - Odomirok 11

Question 1

Purpose of the Common Interrogatories section

Answer 1

To give more details about the company’s operations, business practices, types of internal and external controls in place

Question 2

Items discussed in the general section of Common Interrogatories

Answer 2

• Holding company relationships
• Latests regulatory financial exams
• Excessive sales commission levels
• Merger activity
• Suspension if licenses
• Foreign control
• Exemptions from required regulations
• Whether senior management is subject to a code of ethics

Question 3

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

Answer 3

• If it has suspended licenses or doesn’t 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 4

What details does General Section disclose about the latest financial exam

Answer 4

• 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 had complied with all adjustments and recommendations from the examination report

Question 5

What questions do the interrogatories contain about the board of directors

Answer 5

• Role if the board approving the purchase or 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 6

Purpose of Financial Interrogatories

Answer 6

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 or affiliates

Question 7

What areas do the Investment Interrogatories question

Answer 7

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

Question 8

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

Answer 8

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 one of the following:
  •Duration of at least 2 years and non-cancelable
  •Limited cancellation provision
  •Aggregate stop loss coverage
  •Either party has right to commute for reason other than downgrade in credit rating of other party
  •Ability to report or pay losses less frequently than quarterly
  •Delayed reimbursements to the ceding company