OSFI.AA Flashcards
what are the legal requirements for the appointment of an AA?
- insurer must appoint an AA
- insurer must notify OSFI of the appointment
- AA must be FCIA
- AA can’t be CEO, COO or similar without authorization from OSFI
- AA can’t be CFO without audit committee permission
- audit committee must certify AA, CFO duties can be performed competently & independently
- insurer must notify OSFI if BoD revokes AA’s appointment
- outgoing AA must write report to BoD, OSFI on circumstances and reasons for leaving
- incoming AA must review outgoing AA’s report within 15 days
- if incoming AA doesnot receive report within 15 days, they may accept appointment regardless
summarize the roles & responsibilities of an AA
1) valuation of reserves
2) 5 reports ( FFAPM)
- Financial position report
- Financial condition report
- AAR
- PH fairness report
- Material adverse event report
3) final opinion & memo
what is the main responsibility of AA?
AA must perform a valuation of the policy liabilities at year end using AAP (Accepted Actuarial Practice)
describe AAR
- must be completed at least 21 days before AGM annually (Annual General Meeting)
- must state whether annual report fairly represents results of valuation
where is the AAR on financial position sent?
Financial Position Report
- completed annually
- send to BoD
when & how is the AAR on financial condition done & where is it sent?
Financial Condition Report:
- must complete when directed by OSFI
- involves a 3-5 year projection possibly using FCT methodology
- send to BoD, OSFI
when is the AA’s MAE (Material Adverse Event) report done & where is it sent?
- report on MAE requiring rectification 整顿
- send to BoD, CEO, CFO
what is the report AA must complete that relates to the PH?
Policy Holder Report
- completed annually
- assesses fairness with which policy holders are treated regarding dividends/bonus/other benefits
what does AA’s final opinion contain?
concerns parts of financial statements requiring discretion审慎 or significant (calculations, judgements)
main AA qualification + 3 rules
FCIA in good standing
1) PPS with ICSC (Perform Professional Services with Integrity/Competence/Skill/Care)
2) PPS only when qualified to do so
3) meet all applicable SOPs
OSFI’s expectations regarding an AA
AA must be a Canadian professional with Canadian experience:
Exp:
- 3 years of Canadian experience from past 6 years including 1 year in valuation
- experience with CIA’s SOPs also insurance legislation and regulation
Professionalism:
- must maintain professional designation requirements
- no adverse findings with CIA disciplinary tribunal
setup questions
what are the objectives of a peer review?
AAR
- Assist OSFI in assessing insurance safety & soundness
- Assist AA by providing independent advice and additional source of professional education
- Raise confidence in AA with management, public & regulators
abbreviated list of peer review work
i AM AA DIE MAF
- Assumptions & Methods
- use AAP? (Accepted Actuarial Practice)
- Document?
- examine Internal & External changes if material
- examine MCT/BAAT assumptions and methods
- examine Adequacy of procedures, systems, works of others
- examine FCT scenarios, A&M
Describe peer review work - A&M
- is each assumption independently reasonable
- are methods appropriate for each valuation model?
Describe peer review work - Document
did AA report accurately document AM used in the valuation?
Describe peer review work - examine internal/external changes
review all material internal/external changes regarding the valuation
Describe peer review work - F
FCT scenarios, A &M
review A&M, scenarios used in evaluation of the future financial condition of insurer
responsibilities of AA and management
full cooperation - respond to reviewer in a timely manner with all relevant documents and information
who sets the global materiality level for a company and what is the basis?
- external auditor sets the materiality level for the company as a whole
- basis = size of company (bigger company have higher materiality thresholds)
material changes to consider
- systems (valuation software)
- material external event (inflation)
- valuation assumptions (LDFs, trends)
- valuation methods (for claim liabilities)
- operations (investment policies)
is auditor’s level sufficient for AA and peer review?
- no, a numerical threshold for company as a whole is not sufficient
-peer reviewer & AA must use professional judgement for different areas within company
what causes increased rigor?
- getting near internal capital targets or solvency control levels
- small changes could trigger significant actions
difference between external audit and peer review
Audit:
- checks that FS is free from material misstatement as a whole
- uses CICA standard
Peer review:
- reviews AA’s financial statement work at more granular level
- uses CIA standard
