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COPLFR Flashcards

1
Q

SAO file date

A

3/1

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2
Q

Main purposes of SAO

A

States actuary’s opinion about reasonableness of reserves
Notify stakeholders of significant risks and uncertainties that may impact reserves
Disclose potential for significant adverse deviation

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3
Q

Qualified Actuary

A

Member in good standing with CAS – or AAA approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the AAA

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4
Q

Appointment date of Actuary

A

12/31 of calendar year for which opinion will be given

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5
Q

Insurance Commissioner, appointment of actuary

A

Within five days of appointment of actuary, notify commissioner of name, manner of appointment, and qualified statement

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6
Q

Replacing actuary

A

Notify insurance department within five days, figure out what went wrong

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7
Q

Exemptions from SAO

A

Small companies (less than $1M in premium and less than $1M in reserves), financial hardship (1% of surplus or 3% of reserves), in receivership or liquidation

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8
Q

SAO contents

A 
ISOR:
Identification paragraph
Scope paragraph
Opinion paragraph
Relevant comments
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9
Q

Identification Paragraph, SAO

A 
Appointed Actuary
Relationship to company
Qualifications
Date of appointment
State that Board made appointment
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10
Q

Scope Paragraph, SAO

A

Mentions reserve elements upon which the actuary is opining (and not); should include a paragraph about examination of assumptions and methodology that support booked reserves

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11
Q

Stated basis of the reserves

A

Discount, risk margin, recoverable gross/net, potential for uncollectible receivables, types of unpaid LAE

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12
Q

SAO Additional Disclosures

A

Review date
Data was reconciled to Schedule P by actuary, or
Actuary reviewed reconciliation prepared by insurer

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13
Q

Review date, SAO

A

Date through which the material information known to the actuary is included in forming the reserve opinion

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14
Q

Opinion Paragraph, SAO

A

Must list opinion of actuary regarding reserves (in aggregate); state whether for combined or separate loss andLAE

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15
Q

Reasonable Provision

A

Stated reserve is in the actuary’s range of reasonable estimates

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16
Q

Deficient Provision

A

Stated reserve < minimum of range; actuary needs to disclose minimum

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17
Q

Redundant Provision

A

Stated reserve > maximum of range; actuary needs to disclose maximum

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18
Q

Qualified opinion

A

If certain items cannot be estimated or if the actuary is unable to provide an opinion on those items; all it means is there is a portion of the reserves not covered by SAO

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19
Q

Qualified opinion disclosures

A

Items to which qualification relates
Reason for qualification
Amount for above items, if possible
(If not deemed to be material, qualified opinion does not need to be made)

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20
Q

No opinion

A

Cannot reach conclusion due to limitations in the data, analyses, etc.; should provide description as to why

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21
Q

Relevant Comments, SAO

A

Provides context to regulators; considered most valuable section of SAO;

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22
Q

Relevant Comments sections

A 
Risk of Material Adverse Deviation
Anticipated Salsub
Reinsurance
IRIS Ratios
Methods and Assumptions
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23
Q

Risk of Adverse Deviation

A

Amount of deviation actuary considers to be material (how)
Description of factors or conditions underlying significant risks
Statement about whether actuary believes there are significant risks that could result in RAD

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24
Q

Asbestos exposures

A

Any loss or potential loss related directly or indirectly to the manufacture, distribution… of asbestos, excluding policies specifically written for this

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25
Environmental exposures
Loss or potential loss related directly or indirectly to the remediation of a site arising from past operations or waste disposal
26
AE exposures in SAO
Receive special attention in SAO because mass torts cause material adverse deviation, traditional methods not applicable
27
Financial reinsurance, SAO
Determination is from insurer, not actuary; must always comment on this in the SAO
28
Uncollectible reinsurance, SAO
Review reinsurer ratings, talk to management, discuss materiality of losses ceded to reinsurers in poor financial health
29
IRIS ratios, SAO
11, 12, and 13; paragraph required if there are exceptional values; if none, still include wording to indicate review of calculations
30
Changes in methods and assumptions, SAO (not considered)
Use of assumptions for new segments of business; updating of data, factors, or weights
31
Other disclosures
Intended users/purpose of SAO | Whether any material assumption was prescribed by law
32
Actuarial Report
Document or other presentation, prepared as a formal means of conveying to state regulatory authority;
33
Actuarial report must include
Actuary's relationship to company, exhibit that ties to annual statement, exhibit that reconciles and maps data, changes in estimates, comments on trends, IRIS ratios
34
CASTF most notable deficiencies in Actuarial Reports
"Actuarial judgment" not sufficient explanation; lack of incorporation of inflation, Schedule P reconciliation only in summary format
35
AOS
Supplement to SAO: 1) Range of estimates/point estimate 2) Carried reserve 3) Difference between two on net basis 4) Difference between two on gross basis 5) Whether insurer has experienced adverse development recently (more than 5% of surplus in 3 out of last 5 years)
36
Risk of material adverse deviation
If there is reasonable possibility company will experience deviation that will cause it to reach "adverse" condition; about 1/3 conclude this
37
Bright Line Test
If actuary does not address material adverse deviation, but 10% of net LLAE reserves exceed difference between TAC and CAL, comment should be sought.
38
Actuarial Report Retention
7 years
39
ASOP 36
Statements of Actuarial Opinion
40
Materiality
Material omission or misstatement is defined as one where the judgment of a reasonable person would be influenced
41
Contracts not long term
Mortgage guaranty, financial guaranty, surety
42
Internal controls
``` Segregation of duties (reserving/pricing) Reserve committees Internal audit Actuarial peer review Report from Appointed Actuary ```
43
External controls
External audit Attestations Financial Examinations Replacement of Appointed Actuary
44
Undue Management Influence
Actuary not given comprehensive info Late info leading to inadequate time Actuary denied access to certain employees Employment contingent on agreement of reserves Actuary replaced with a yes-man
45
Description of adverse reserve development requirement
If ratio of reserve development to prior year PHS is greater than 5% in 3 or more of last 5 years
46
Long duration contracts
>= 13 months Insurer cannot cancel or increase premium during term Actuary must opine on UEPR
47
Topics that must be addressed in SAO
Retro reinsurance Collectibility A/E reserves Recoverables from voluntary/involuntary market pools
48
Topics that must be included in Actuarial Report
Reconciliation to Schedule P Risk of material adverse deviation IRIS 11-13
49
Significant parts to Exhibit B, SAO
``` SPADDE Salsub Pools A/E Discounting long Duration EREs ```
50
Relevant Comments section, SAO
``` RAMBLR Reinsurance Assumptions/Methods Materiality standard exhibit B parts Long-term contracts Ratios (IRIS) ```
51
Significant parts to Exhibit A, SAO
``` GNOR Gross Loss and LAE reserves (separately) Net Loss and LAE reserves (separately) Other reserves Retro reinsurance reserves ```
52
Common materiality standards
10% of carried reserve (decision change) 10% of PHS (solvency/triggers IRIS) Change in RBC (regulation) Change in rating
53
Pooling disclosures, RELEVANT COMMENTS
If there is a lag, how is it accrued If pool reserves are material to total reserves Collectability of assessments Whether actuary reviewed other actuary's review Nature of member's liability as part of pool
54
Scope paragraph disclosures
Date of review Source of data (name, affiliation) Evaluation date Reconciliation to Schedule P Disclosure Items Exhibit B Reviewed data for reasonableness / consistency Reviewed method / assumptions used in determining reserves listed in Exhibit A
55
Disclosures when using another actuary's analysis
Name of other actuary Affiliation of other actuary That the actuary reviewed the other actuary's work Extent of that review
56
Disclosures, qualified opinion
Portion to which qualification applies Reason for qualification Amount of carried reserves (if disclosed by company) Other reserves are reasonable
57
SAO reconciliation to Schedule P
Net paid losses reconciled to Part 1 By AY and LOB Should disclose whether s/he relied on reconciliation performed by someone else
58
Financial hardship exemption
Cost of opinion > 1% PHS or 3% GWP
59
SAO, Lack of historical data (considerations)
Whether there is enough data for an evaluation If using industry data, be sure it is comparable Whether to provide disclosure about variability and uncertainty of results
60
Actuary obligations to board of directors
Report on items in Scope annually | Notify the board within five days if there is a material error (in data)
61
RMAD example
In order to establish my materiality standard, I examined three amounts... My materiality standard is X. I have identified the major risk factors for this company's reserves as ___, ___, and ___. The existence of these factors leads me to conclude that a risk of material adverse deviation exists.
62
Replacing actuary, steps
1. Notify commissioner within 5 days 2. Notify commissioner of disagreements related to substantive wording of SAO 3. Request letter from former actuary stating agreement/disagreement 4. Replace by end of year that reserves are opined
63
ASOP 20
Discounting of PC Unpaid Claim Estimates
64
ASOP 41
Actuarial Communications
65
ASOP 43
PC Claim Estimates
66
Steps if there is an error
Actuary notifies company (5 days) Notification includes summary of reason for error and amended SAO Insurer notifies commissioner (5 days -- should copy actuary)

Exam 6 (51 decks)

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