TIA Section A - Odomirok 11

Question 1

Purpose of the Common Interrogatories section:

Answer 1

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
• 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 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 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 4

What details does the 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 & recommendations from the examination report

Question 5

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

Answer 5

• 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 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/ affiliates

Question 7

What areas do the Investment interrogatories question:

Answer 7

• Assets & investment decisions
• Security lending programs and associated collateral
• Hedging programs
• Mandatory convertible stocks or bonds
• Compliance with NAIC “Purposes & 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 features:
  *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 the downgrade in the credit rating of the other party
  *Ability to report or pay losses less frequently than quarterly
  *Delayed reimbursements to the ceding company