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AA cannot be
- CEO or COO without authorization from Superintendent
- CFO without audit committee's permission
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If AA appt is revoked or if AA resigns - Responsibilities of directors, old AA, new AA
- Directors: notify Superintendent in writing
- AA who resigns or is revoked: report to Superintendent and directors in writing
- why resign or
- why in his opinion appt was revoked
- New actuary: request written notice from previous AA on circumstances and reasons and
- not accept until such notice is received or
- 15 days has passed
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Role and duties of the AA
- Value policy liabilities at end of each year
- Make AAR on policy liabilities as specified by OSFI
- Reporting duties
- to directors at least once a year on financial condition and future financial health (DCAT)
- to officers matters with potential material adverse impact on financial health, specifiy deadline for action and if not taken by deadline, inform Superintendent and send a report to Board
- to s.h.'s and p.h.'s 21 days before annual meeting on whether annual statement fairly presents valuation results
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CIA Rules of prof Conduct
- Act honestly and perform prof services with integrity, competence and care.
- Prof services
- only performed by CIA member who's qualified to do so.
- must meet applicable SoP's
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Qualifications required - AA
- Work in Canada at least 3 of last 6 years, of which at least 1 year was valuation of Canadian policy liabilities
- FCIA
- Experience with CIA’s SoP and insurance legislation and regulation
- Up to date wrt. CIA’s Continuing Prof Development requirement
- Not subject of adverse finding by CIA Disciplinary Tribunal
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General objectives of peer review of AA
- Assist OSFI in assessment of insurer's safety and soundness (e.g. valuation, DCAT)
- Benefit AA by providing:
- source of independent consultation advice
- additional source of prof education
- Increase public confidence in work of AA and insurance industry
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Functions external reviewer is expected to perform for insurer
- Confirm AA’s work is done in accord with AAP
- Review methods and assumptions and whether appropriate
- Review whether AAR sufficiently describes methods and assumptions
- Review adequacy of procedures, systems and work of others relied on by AA, to the extent not reviewed by external auditor
- Review effect of material changes to assumptions and methods
- Review DCAT methods, assumptions, and scenarios
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Examples of material changes to valuation
- Key valuation assumptions
- Unusual loss development
- Methodology
- Operations or circumstances (acquisitions, investment policy, etc.)
- Revised valuation model
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External peer reviewer vs. external auditor
- Peer reviewer reviews reasonableness of assumptions and methods used by AA; External auditor ensures f.s. are free from material misstatement.
- Peer reviewer ascertains AA’s work is done in accord to AAP; External auditor evaluates f.s. based on GAAP
- Peer reviewer reviews work at more granular level and provides feedback to AA (prof edu); not external auditors
- External auditor verifies quality of data used by AA; not peer reviewer
- External auditor needs to perform recalculations; not peer reviewer
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Criteria for objectivity of reviewer
- NOT
- employee of company or affiliated companies
- been employed by company or served as AA during past 3 years
- having direct investment (except p.h., depositor, beneficiary) in the company, but may have indirect interest (mutual fund)
- If a member of a consulting firm is
- AA, another member of same firm cannot be peer reviewer
- involved in actuarial work related to f.s. or financial condition reporting for the company, another member of same firm may be peer reviewer only if not involved in this work
- May be working in company's external audit firm, but preferably not on audit team.
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Condition for CFO to become AA
- Audit committee needs to write to Superintendent that it is satisfied
- able to do both jobs and
- do both jobs independently
- Superintendent has to approve
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Responsibilities before accepting AA
- Accept only if has necessary qualifications, experience, knowledge.
- Consult with previous AA any prof reasons why not to accept.
- Ensure board,
- understand duties of AA
- agree to requirements needed for AA to fulfill duties incl timely access to all necessary MI
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Contents of Peer Review Reports
- Describe work done by reviewer
- Timing of work
- Materiality level used for review
- Recommendations for further review or work by AA in coming year
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