1. AA cannot be
    • CEO or COO without authorization from Superintendent
    • CFO without audit committee's permission
  2. 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      • why in his opinion appt was revoked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
  3. 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
  4. 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
  5. 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
  6. 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
  7. 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
  8. Examples of material changes to valuation
    • Key valuation assumptions
    • Unusual loss development
    • Methodology
    • Operations or circumstances (acquisitions, investment policy, etc.)
    • Revised valuation model
  9. 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
  10. Criteria for objectivity of reviewer
    1. 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)
    2. 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
    3. May be working in company's external audit firm, but preferably not on audit team.
  11. 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
  12. 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
  13. 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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