QUESTIONNAIRE APPOINTED/VALUATION ACTUARIES QUESTIONNAIRE FOR PROPERTY-CASUALTY INSURANCE COMPANY FINANCIAL REPORTING IN CANADA PART I

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1 QUESTIONNAIRE APPOINTED/VALUATION ACTUARIES QUESTIONNAIRE FOR PROPERTY-CASUALTY INSURANCE COMPANY FINANCIAL REPORTING IN CANADA PART I JANUARY Canadian Institute of Actuaries Document Ce questionnaire est disponible en français Canadian Institute of Actuaries Institut Canadien des Actuaires

2 Canadian Institute of Actuaries Institut Canadien des Actuaires MEMORANDUM APPOINTED/VALUATION ACTUARIES QUESTIONNAIRE FOR PROPERTY-CASUALTY INSURANCE COMPANY FINANCIAL REPORTING IN CANADA TO: All Property-Casualty Appointed/Valuation Actuaries FROM: Robert H. Stapleford, Chairperson of the Eligibility and Education Council DATE: January 15, 2002 You will find enclosed a copy of the 2001 version of the questionnaire together with two envelopes for returning Part I and Part II. To return:! Insert Part II into the envelope marked Part II and seal it;! Insert the Part II envelope, along with Part I of the questionnaire, into the pre-addressed envelope and send it to the CIA Secretariat. Since 1991, it has been a requirement to file this compulsory questionnaire with the Institute annually. Individual responses to Part I will only be seen by members of the Property-Casualty Subcommittee of the Committee on the Application of Rules and Standards, except if the subcommittee determines that the responses should be turned over to the Committee on Professional Conduct. Individual responses to Part II will be compiled on a confidential basis by an outside data compiler, and presented in a report to appointed actuaries, so that they may evaluate their own responses relative to the ranges in the report. FILING DATE: Completed questionnaires are to be received by the CIA office by no later than April 15, 2002 For the committee to complete its work in a reasonable time frame, it is important that the members meet the deadline. Members whose questionnaires are not received by April 15, 2002, will be contacted by the CIA office and/or the chairperson of the Committee on the Application of Rules and Standards. te that failure to respond could result in disciplinary proceedings. Unusual circumstances will, of course, be considered. QUESTIONS ON THE QUESTIONNAIRE TO: COMMENTS ON THE COMPLIANCE PROCESS TO: Liam McFarlane, Vice-Chairperson of the Committee on the Application of Rules and Standards. John F. Brierley, Chairperson of the Committee on the Application of Rules and Standards. Parts I and II of the questionnaire must not be submitted until you receive the pre-addressed envelope via mail in order to ensure the confidentiality of your response. RHS Secretariat: Albert, Ottawa, ON K1R 7X7 (613) FAX: (613)

3 Property and Casualty Questionnaire January 2002 APPOINTED/VALUATION ACTUARIES QUESTIONNAIRE FOR PROPERTY-CASUALTY INSURANCE COMPANY FINANCIAL REPORTING IN CANADA INTRODUCTION This questionnaire has been prepared at the direction of the Canadian Institute of Actuaries. It has been designed to respond, at least in part, to the Institute s commitment to monitoring the compliance by its members with the standards of practice. Individual responses to Part I will only be seen by members of the Property-Casualty Subcommittee of the Committee on the Application of Rules and Standards designated specifically for the purpose of reviewing the responses, except in those cases where the Property-Casualty Subcommittee determines that the responses should be turned over to the Committee on Professional Conduct. Individual responses to Part II will be compiled on a confidential basis by data compilers contracted by the CIA, and will be presented in a report to Appointed Actuaries. The questionnaire has been designed to cover the statutory valuation process of the property-casualty insurance companies reporting in Canada as described in the Report of the Appointed/Valuation Actuary filed with the applicable legislative authority. The completed questionnaire must be signed by the Appointed/Valuation Actuary and filed with the Canadian Institute of Actuaries. It has been designed to allow the Institute to monitor compliance with certain key areas of the recommendations. Filing Deadline: Completed questionnaire Parts I and II must be filed early enough to ensure receipt by the Canadian Institute of Actuaries no later than April 15,

4 APPOINTED/VALUATION ACTUARIES QUESTIONNAIRE FOR PROPERTY-CASUALTY INSURANCE COMPANY FINANCIAL REPORTING IN CANADA PART I IDENTIFICATION OF PARTIES I,, am a Fellow of the Canadian Institute of Actuaries and am familiar with the Institute's Standards of Practice, including the Recommendations for Property and Casualty Insurance Company Financial Reporting ( the Recommendations ). I have valued the policy liabilities of the. I undertook this valuation in my capacity as: as at Appointed Actuary Valuation Actuary THE ENTITY IS (CHECK 1 IN EACH COLUMN): Registration Type of Company Domicile Federally registered Direct insurer Canadian branch Provincially registered Reinsurer only Canadian company (province ) Reciprocal Other (specify) Other (specify) Captive Pool or association VALUATION OF THE FINANCIAL POSITION (2001 FISCAL YEAR-END) General 1. i) With respect to this valuation, I am satisfied that it has been prepared in compliance with the CIA Recommendations for Property and Casualty Insurance Company Financial Reporting: ii) If no, I have maintained records including justification for non-compliance: 2

5 Purpose and Scope of the Valuation 2. The purpose of my valuation was: To report in statutory financial statements To report in published financial statements Other please specify 3. The scope of my valuation encompassed the following (check all applicable boxes): i) Claims liabilities ii) Premium liabilities iii) Other statement items (specify) ndiscounted Discounted Liabilities = $0 Gross Net Gross Net Gross Net 4. If the scope of your valuation did not include claims and premium liabilities on a discounted basis, please provide comments. Standards of Materiality 5. i) I have established standards of materiality consistent with Section 1.08 of the Recommendations: ii) If yes, the standards of materiality: are described in the valuation report are not described in the valuation report, but are described in the working papers 3

6 Level of Disclosure 6. i) Have there been material changes in methods or assumptions used in your valuation? ii) If yes, have they been disclosed in conformity with Sections 5.03, 6.04 and 7.04 of the Recommendations? Statement of Opinion 7. i) My statement of opinion was: Unqualified Qualified ii) If qualified, please check each of the qualifications that apply: Qualified with respect to the regulatory limitation on reflecting the time value of money Qualified with respect to availability of the auditor s report Qualified other than per above iii) If the opinion is unqualified, is the difference between the discounted and undiscounted estimates of the claims liabilities within the standard of materiality? iv) If the opinion is unqualified, is the difference between the discounted and undiscounted estimates of the premium liabilities within the standard of materiality? 4

7 Data, Methods and Assumptions 8. i) I have verified the consistency of the data across valuation periods, against prior reviews, as well as against the financial records of the entity. For the subset of valuation data that is subject to audit, I have reconciled the data to the financial records of the entity: ii) To my knowledge, all items having a material effect on the liabilities have been included in the valuation: 9. Since the last valuation, and with respect to each of the following items, have there been changes that were considered to have a material effect on the estimated liabilities: i) Computer systems and accounting procedures of the entity: ii) Policies and practices affecting the underwriting and claims functions of the entity: iii) Reinsurance programs of the entity: iv) External influences including but not limited to the judicial, regulatory, legislative and economic environment pertinent to the business written by the entity: v) Methods used in the valuation: vi) Assumptions used in the valuation: 10. If yes to any of the items in question 9, above, have you explicitly considered the effect of the changes? 5

8 Reliance on the Work of Others 11. i) Have you relied on work of others with respect to amounts which are material to your valuation? ii) If yes, check each of the following that are material: Liabilities arising from participation in Automobile Pools (e.g. Facility Association) Other amounts valued by an FCIA Amounts valued or provided by other individuals/entities Report to Directors/Chief Agent 12. i) [Answer this part if the entity is a Canadian insurance company] Did you meet with the directors of the company, or the audit committee during the last year, in order to report on the financial position of the entity? t Applicable ii) [Answer this part if the entity is a branch of a foreign insurance company] Did you meet with the chief agent during the last year, in order to report on the financial position of the entity? t Applicable 6

9 Description of the Role of the Appointed Actuary 13. i) Was your report (statement of opinion) included in any Canadian published financial statements? t Applicable ii) If yes, is a description of the role of the Appointed Actuary included in the following? tes to the financial statements Management Discussion and Analysis, accompanying the financial statements Description not included Discounting and Provision for Adverse Deviations 14. For each of the following items, check the highest estimate. Check more than one box if two or more estimates are not materially different from each other: ndiscounted Discounted Booked i. Gross claim liabilities ii. Net Claims liabilities iii. Gross Premium liabilities iv. Net Premium liabilities 7

10 VALUATION OF THE FINANCIAL CONDITION ( 2000 FISCAL YEAR-END) General 15. i) Did you undertake a valuation of the financial condition (DCAT analysis) for the fiscal yearend? ii) If no, check each of the following that apply: A DCAT report was not required by law I was appointed after the DCAT report had been completed Other (specify) IF THE ANSWER TO QUESTION 15 IS NO, SKIP TO THE SIGNATURE SECTION ON PAGE i) I am satisfied that the valuation has been prepared in compliance with the CIA Standard of Practice for Dynamic Capital Adequacy Testing: ii) If no, I have maintained records including justification for noncompliance: Statement of Opinion on Financial Condition 17. i) My statement of opinion was: Unqualified Qualified ii) If qualified, please provide comments below: 8

11 FINANCIAL CONDITION (CONT D) Report to Directors/Chief Agent on Financial Condition 18. i) [Answer this part if the entity is a Canadian insurance company] Did you report to the directors of the company, or the audit committee during the last year on the financial condition of the entity? t Applicable ii) [Answer this part if the entity is a branch of a foreign insurance company] Did you report to the chief agent during the last year on the financial condition of the entity? t Applicable Data, Methods and Assumptions 19. i) Have you considered plausible adverse scenarios for each of the 11 risk categories identified in the DCAT Standard of Practice? ii) Have you considered adverse scenarios for any risk categories not identified in the DCAT Standard of Practice? Specify the risk categories: iii) Have you reported on the results of at least three plausible adverse scenarios? 9

12 ACTUARY S SIGNATURE Member Signature Name Telephone Date 10