CIA Subsequent Events

An event that actuary 1st becomes aware of btw calc date and report date

• Calc date is effective date of a calculation; e.g., BS date
• Report date is when actuary completes the report (with oral or written communication to users about his work)

1. Provides info about entity as it was at calc date,
2. Retroactively makes entity dif at calc date, or
3. Makes entity dif after calc date and purpose of work is to report on entity as it will be as a result of event.

• Events occured after reporting period (calc date) and purpose of work is to report on entity as it was at calc date:
• Adjusting:
  • provide evidence of conditions that existed (make entity dif) on or before calc date -> recalc policy liabilities as of calc date.
  • then report revised mgt / auditor to put into f.s.
  • if not material don't reflect
• Non-adjusting:
  • indicate conditions that arose (make entity dif) after calc date -> disclosure and no change to BS/IS
  • recalc so mgt can incl for disclosures, but f.s. amounts remain unchanged.
  • if not material don't disclose

1. Reveals error
2. Provides info about entity
3. Is a decision which changes entity

Not a subseq event -> treats event similar to other info in valuation

Data defect or calc error?

1. Yes: If >= material standard, reflect and report to mgt / auditor
2. No -> When did it occur?
   1. <= calc date: reflect
   2. > calc date -> when did entity become dif?
      • if <= calc date, reflect and report to mgt / auditor
      • If > calc date -> what is the purpose of the work? to report the entity:
        • as a result of event: reflect
        • as it was at calc date: report on impact but don't reflect

Would have been reflected if it were subseq event?

1. no -> no further action
2. yes -> invalidate report? (see when to take subseq event into account)
   1. yes: withdraw and amend
   2. no: inform user (incl auditor who needs to independently evaluate effect on audit opinion) but don't reflect

• When did the actuary first become aware of the event?
• Does the event reveal a data defect or calc error?
• When did the event occur?
• What is the purpose of the work?

• Nature of event
• Estimated financial effect incl gross amount of claims, reinsurance recoveries, reinstatement premiums
• Discussion about impact of event on:
  • future results of entity;
  • reinsurance risk of non-recovery

Became aware between calc and report date; occurred after calc date, and didn't make insurers dif at calc date

• report if material but don’t reflect
• if not material (little exposure to the region), no action required

• If no material impact, but because it’s a significant industry-wide event, report regardless of materiality;
• If material exposure, invalidated some reports

If insolvency was

• culmination of gradual deterioration in reinsurer’s financial circumstances, most of which occurred before calc date but not apparent until revealed by insolvency, then insolvency provides info about entity as it was at calc date -> reflect in f.s.
• caused by CAT, provides info about change in conditions which makes entity dif after calc date -> only disclose

Stock market crash:

• provides additional info about entity as it was at calc date as it is indicator of outlook for common share investments at that date -> reflect in f.s.
• makes entity dif after calc date since creates new situation -> disclose

Data error so if passes materiality test, new report

Reflect in work since event occurred before calc date

Knowledge of change in incurred after calc date. if IBNR insufficient to absorb change in incurred -> non-adjusting subsequent event and disclose the impact

Unlikely to be material, don’t include