TOP QUESTIONS

Question 1

OSFI’s expectations regarding an AA

Answer 1

• must have 3 years of canadian experience within past 6 years (including 1 year of valuation)
• must have experience with CIA’s SOPs including insurance legislation & regulation
• must maintain professional development requirements
• must have NO adverse findings with CIA disciplinary tribunal

Question 2

identify examples of FEDERAL regulation/legislation regarding insurer solvency

Answer 2

• CONDITIONS for entering business
• INVESTMENTS
• regular REPORTING
• CALCULATION of assets & reserves
• PROTECT policyholders

Question 3

why do insurers maintain credit ratings with rating agencies

Answer 3

• UNRATED INSURERS: agents are wary of unrated insurers
• SOLVENCY ASSESSMENT: 3rd parties rely on ratings
• EFFICIENCY: agents, underwriters, regulators don’t have expertise to do their own rating

Question 4

identify internal cause of insurer failure

Answer 4

Governance & internal controls (breakdown)
New entrants (competition & inexperience)
Growth - too rapid (higher LR for new business)
Size - too small to absorb losses

Question 5

describe internal cause of failure 1 - governance

Answer 5

poor strategic decisions, U/W due to inadequate internal controls on data integrity

Question 6

describe internal cause of failure 2 - new entrant

Answer 6

competition from established companies, inexperienced management

Question 7

describe internal cause of failure 3 - growth

Answer 7

rapid growth correlated with deteriorating loss reserves

growth into areas with lack of expertise

Question 8

describe internal cause of failure 4 - size

Answer 8

small firms less able to absorb unexpected financial stress