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Educational Notes
- Discounting
- Premium Liabilities
- DCAT
- Subsequent Events
- Evaluation of the Runoff of P&C Claims Liabilities when the Liabilities are Discounted in Accordance with AAP
- Disclosure Requirements IFRS 4 – Insurance Contracts for P&C Insurers
- MfAD for P&C
- Appropriate Treatment of Reinsurance
- Consideration of Future Income Taxes in the Valuation of Policy Liabilities
- Valuation of Policy Liabilities - Claim Liabilities and Premium Liabilities
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Regulatory Guidance
- OSFI Annual Memorandum for AAR
- Capital Requirements: OSFI’s MCT / BAAT
- Stress Testing: assess system-wide vulnerabilities
- Regulatory Capital and Internal Capital Targets: setting of insurer-specific target capital ratios and how such targets relate to the assessment of capital adequacy within the context of OSFI’s supervisory framework
- ORSA: OSFI expectatio on insurer’s own assessment of its risks, capital needs, and solvency position and for setting internal targets.
- for quantatitve, can use DCAT, stress testing, internal capital target setting and the policy liabilities valuation report.
- qualitative aspects of ORSA; determination of the risk appetite and risk tolerance
- report reviewed by board annually. submitted to OSFI at least annually and within 30 days of being reviewed by board
- Appointed Actuary: Legal Requirements, Qualifications, and Peer Review
- Earthquake Exposure Sound Practices
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Auto Reforms
Consider potential effect on valuation and DCAT
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Current or Emerging Issues and Other Considerations
- Ontario
- YE 2016, continue to consider the effect of Ontario auto reforms
- Before using post-reform claims experience for valuation, consider maturity. If not fully credible, reasonable to carry forward a priori assumptions re estimated effect of product reforms, subject to consideration of rate changes, loss cost trend, on-level
- FSCO: Ontario industry benchmark assumptions (loss trends and 2010 reform loss cost adjustment factors).
- Effective June 1, 2016, amendments to Statutory Accident Benefits Schedule (SABS) and insurance act regulation 664 to reduce costs in the auto insurance system and to bring them more in line with those of other provinces
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Recent Judicial, Legislative, and Political Events (ON)
- Economical v. Northbridge (2016)
- A deductible of $2,000 applies to a claim for loss transfer by a first party per claimant.
- Kanagalingam v. Economical (2016)
- FSCO arbitration found insurer could rely on 2-year limitation period when a benefit is denied even if u/l election of benefits is invalid
- Corbett v. Ordorico (2016)
- Ontario Superior Court found that new statutory deductible is to be applied retroactively, including FLA deductible.
- Davis v. Wawanesa (2015)
- Confirmed economic loss definition does not apply retroactively.
- Henderson v. Wawanesa (2015)
- Court ordered assessment of costs payable above limits. still being reviewed
- Vickers v. Palacious (2015)
- Ontario Superior Court found that pre-judgment interest (PJI) substantive and therefore not to be applied retroactively; but new deductible change had left out wording that would restrict its application to older cases. being reviewed
- Cobb v. Long Estate (2015)
- Ontario Superior Court decided a middle-ground PJI provisions paid at 3% and the new statutory deductible was substantive and should not be applied retroactively. reviewed
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The extent to which CATs are significant for valuation depends on:
- nature of business
- exposure in affected region
- policy wordings
- date on which the event occurred.
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Catastrophic Events / FMM
Fort McMurray Wildfires - consider reinsurance implications, inclusion on DCAT reports, and effects on regulatory capital ratios.
- to determine BE, work with claims to make sure that all relevant aspects are accounted for:
- additional living expenses;
- Rental vehicle
- Smoke damage;
- consider the impact from:
- hyperinflation in region and rest of country;
- longer payout pattern for LOB affected;
- Reinsurance margins to be applied for ceded portion; and
- Reinsurance cost associate with UEP.
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