CIA.AA-IFRS17

Question 1

Briefly describe the responsibilities of the AA that have not changed under IFRS 17. (4/6)

Answer 1

Policy Liabilities: The definition and coverage of “policy liabilities” are unchanged

Opinion: The AA continues to provide opinions on policy liabilities.

Others: The AA both relies on and provides work for others, including external auditors.

Reporting: The AA still creates formal reports for regulators following appropriate guidelines.
–
Appointment: The AA’s role remains reserved and requires a formal appointment

AAP: The AA ensures that calculation of policy liabilities follows accepted actuarial practices (AAP) in Canada.

Question 2

What sort of report would the AA issue if they used but did not take responsibility for the work of others?

Answer 2

The AA would issue a report with reservations

Question 3

What sort of report would the AA issue if they used and took responsibility for the work of others?

Answer 3

The AA would issue a report without reservations
(assuming everything else regarding the policy liabilities was in order.)

Question 4

Describe situations where the AA would use but not take responsibility for the work of others. (2)

Answer 4

• if the work conflicts with what would be appropriate for the purpose of the actuarial services
• if the actuary is unable to judge the appropriateness of the work including assumptions & methodology
  (without lots of extra work beyond the scope of the assignment)

Question 5

Describe when the AA would use and take responsibility for the work of others. (3)

Answer 5

when such actions are justified based on considerations such as:
* communication with the other person that is early and periodic
* confidence in the other person?s qualifications & competence
* awareness by the other person of how the actuary intends to use the other persons work

Question 6

Identify 3 items (accounting policies, methods, or assumptions) that may be set by someone other than the AA.

Answer 6

• method to determine discount rates
• eligibility for PAA
• RA for non-financial risk

Question 7

List questions the AA might ask to determine whether to take responsibility for the work of others. (5)

Answer 7

• is the work consistent with a reasonable interpretation of the IFRS 17 standard?
• is the work consistent with accepted actuarial practice in Canada?
• has the AA confirmed the other person’s qualifications and awareness of how the work is being used
• is the work similar to what the AA would have done?
• Is the AA able to judge the appropriateness of the work
  (without substantial additional work beyond the scope of the assignment)

Question 8

Identify examples of situations where it may be appropriate to report with reservation. (5)

(CLINT)

Answer 8

Change in assumption or methodology affecting disclosure items:
* where an item valued by the actuary is materially affected by a change in assumption or methodology that is not disclosed in the financial statements.
Liabilities different than those calculated by the actuary:
* where the financial statements of an insurer report policy liabilities that are materially different from those calculated and reported to the regulator by the AA.
Impracticality of restatement:
* where restating the preceding year valuation to be consistent with the current year valuation would be appropriate but not practical.
New appointment:
* where the newly appointed AA uses but is unable to take responsibility for a predecessor AA?s work.
Takeover of insurer with insufficient records:
* where the AA is unable to judge the appropriateness of a predecessor AA?s work.

Question 9

What is the standard wording for the AA’s opinion according to IFRS 17.

Answer 9

To the policyholders [and shareholders] of [the ABC Insurance Company]:
* I have valued the policy liabilities of [the Company] for its [consolidated] financial statements prepared..
..in accordance with International Financial Reporting Standards for the year ended [31 December xxxx].
* In my opinion, the amount of policy liabilities is appropriate for this purpose.
* The valuation conforms to accepted actuarial practice in Canada and the [consolidated] financial statements fairly present the results of the valuation.

Question 10

Describe 3 differences in the wording of the AA’s opinion under IFRS 17 versus the old standard, IFRS 4

Answer 10

IFRS Compliance:
* The revised opinion stresses that the policy liabilities valuation complies with relevant IFRS standards
* includes IFRS 17 (insurance contracts), IFRS 9 (investment contracts), and IFRS 15 (service contracts).
Appropriate for Financial Statements:
* The AA no longer opines that liabilities make “appropriate provision for all policy obligations.”
* Instead, the AA now asserts the amount of policy liabilities is appropriate for inclusion in the financial statements.
Broader Scope:
* The scope of “fairly present” in the AA’s opinion is broader under IFRS 17.
* This reflects more extensive presentation and disclosure requirements
including details on insurance contract liabilities and more line items derived from the AA?s valuation.