OSFI.AA Flashcards
What are legal requirements of the appointment of an AA (8)
- insurer must appoint AA
- insurer must notify OSFI of the appointment
- AA must be FICA
- AA can’t be (CEO, COO) or similar without the authorization from OSFI
- AA can’t be CFO without audit committee permission (audit must certify AA and CFO duties can be performed competently & independently)
- insurer must notify OSFI if BoD revokes AA’s appointment
- outgoing AA must write report to BoD and OSFI on circumstances & reasons for leaving
- new AA must review outgoing AA’S report within 15 days (if incoming AA does not receive report within 15 days, they may accept appointment regardless)
Summarize the roles & responsibilities of an AA (7)
perform valuation of policy liabilities at year-end using AAP
5 reports:
- Appointed actuary report
- financial position report (annually, send to BoD)
- financial condition report (complete when directed by OSFI, send to BoD & OSFI)
- material adverse event report (and send to BoD, CEO, CFO)
- policyholder fairness report (annually, assesses fairness with which policyholders are treated regarding dividends, bonus, other benefits)
final opinion & memo (concerns parts of financial statements requiring discretion or significant calculations/judgments)
Main AA qualification + 3 rules
main qualification: FCIA
3 rules:
- perform professional services with integrity, competence, skill and care
- perform professional services only when qualified to do so
- meet all applicable SOPs
4 qualifications that OSFI expects in assessing the suitability of an AA
- has at least 3 years of Canadian experiences in the last 6 years with 1 year in valuation
- has experience with CIA SOPs and Canadian legislation and regulation
- must maintain professional designation requirements
- no adverse findings with CIA disciplinary tribunal
What are the objectives of a peer reviewer (3)
- assist OSFI in assessing insurer’s safety and soundness
- assist AA by providing independent advice, being a source of professional development
- raise confidence in AA with management, public, regulators
Identify duties of the external peer reviewer (4)
- see notes for more
Review-did-review-did
- review reasonableness and appropriateness of AA’s assumptions & methods
- did the AA use Accepted Actuarial practice in performing the valuation
- review all material internal and external changes regarding the valuation
- did the AA report accurately document assumptions & methods used in valuation
Identify 3 examples of material changes that the peer review is expected to consider
- system change
- change in valuation methods
- change in valuation assumptions
Describe differences in the responsibilities of an external peer reviewer and an external auditor (3)
- peer reviewer do not do any recalculation but auditors do
- peer reviewer do not verify data or controls but auditors do
- peer reviewer uses CIA SOP guidelines while auditors do not
Content of the peer review report (5)
- description of the work done
- recommendations for further work
- relationship with AA
- materiality level used
- observations of changes in assumptions and methodology
How often is a peer review performed when there is no material changes to the valuation
every 3 years
How ofter is a peer review performed when there have been material changes to the valuation
annually
Qualifications standards of the peer reviewer (2)
- same as the AA (FICA, Canadian experience, no adverse findings from CIA tribunal)
- need to have exposures to 2 or more different (unrelated insurers)
Describe OSFI’s peer reviewer objectivity conditions (7)
==> NOT ALLOWED:
- an employee or AA for the company/subsidiary in past 3 yrs
- shareholder or direct financial investment in company
- from same consulting firm as AA
==> NOT ALLOWED:
- outside non-work discussion with AA
- this means the AA and peer reviewer cannot be friends or drinking buddies!
==> PERMITTED:
- peer reviews can have an INDIRECT financial investment in the company
- peer reviewer CAN be from consulting firm doing financial statements for the company (if not involved in that work)
- peer reviewer CAN be from company’s audit firm (but this is not encouraged)
How often should a peer reviewer be changed
every 2 cycles (6 years), may again be peer reviewer after 1 cycle has passed
Identify reasons for periodic changes of peer reviewer (2)
- enhance objectivity
- increase educational value to AA
