PIN 7 PIN 7 Actuaries
PIN 7.1 PIN 7.1 Introduction
PIN 7.1 Guidance
This chapter requires an
Insurerto provide the DFSAwith a report by an Actuaryin respect of its Insurance Liabilitiesand assets arising in respect of those liabilities (that is, assets which are contingent on the existence and amount of the liabilities, such as reinsurance, salvage and subrogation recoveries). Separate provisions apply in respect of reports on General Insurance Businessand Long-Term Insurance Business.
PIN 7.2 PIN 7.2 The requirement for an actuarial report on general insurance business
Subject to PIN Rule 7.2.2, this section applies to
Insurersconducting General Insurance Business.
Insurerattributes General Insurance Businessto a Long-Term Insurance Fundin accordance with PIN Rule 3.3.4, this section does not apply to that business.
PIN 7.2.3(1) An
Insurer, other than a Captive Insurer, must provide to the DFSAas at each reporting date a written report relating to its General Insurance Business, prepared by an Actuarywho has the qualifications set out in PIN section 7.5.(2) Notwithstanding (1), the DFSA may by written notice require a Captive Insurer to provide, for the period specified in the notice, a written report relating to its General Insurance Business, prepared by an Actuary who has the qualifications set out in PIN section 7.5.
This report must provide details in respect of each
Class of Business, of:(a) significant aspects of the recent experience of the Insurer;(b) the Actuary'sestimate of the value of General Insurance Liabilitiesand of assets arising in respect of those liabilities, determined in accordance with PIN chapter 5;(c) where there has been a change in the assumptions or in valuation method from that adopted at the previous valuation, the effect of these changes on the General Insurance Liabilitiesand assets arising in respect of those liabilities, as at the reporting date;(d) the adequacy and appropriateness of data made available to the Actuaryby the Insurer;(e) procedures undertaken by the Actuaryto assess the reliability of the data;(f) the model or models used by the Actuary;(g) the assumptions used by the Actuaryin the valuation process including, without limitation, assumptions made as to inflation and discount rates, future expense rates and, where relevant, future investment income;(h) the approach taken to estimate the variability of the estimate; and(i) the nature and findings of sensitivity analyses undertaken.
PIN 7.3 PIN 7.3 The requirement for an actuarial investigation of and report on long-term insurance business
This section applies to
Insurersconducting Long-Term Insurance Business, in respect of each Long-Term Insurance Fundmaintained or deemed to be maintained by the Insurer.
Insurermust arrange for an actuarial investigation of the assets and liabilities of every Long-Term Insurance Fundmaintained or deemed to be maintained by it, including a determination of surplus in each such fund, to be performed as at a Reference Datewhich must be not more than one year later than the date of establishment of the Long-Term Insurance Fundor the previous Reference Date(if later).
An investigation of the type set out in PIN Rule 7.3.2 must in any case be performed as at every reporting date of the
PIN 7.3.4 PIN 7.3.4
An actuarial investigation under this section must be performed by an
Actuarywho has the qualifications set out in PIN section 7.5, and must be conducted according to principles approved by the DFSA.
PIN 7.3.4 Guidance
Principles set out in professional standards issued by a professional actuarial body that is a full member of the International Actuarial Association will normally be approved by the
DFSAfor the purposes of PIN Rule 7.3.4, to the extent that they do not conflict with the provisions of this chapter.
Insurerarranges for an actuarial investigation under this section, the Insurermust provide to the DFSAa written report prepared by the Actuaryconducting the actuarial investigation, not later than four months from the Reference Dateof the actuarial investigation.
PIN 7.3.6 PIN 7.3.6
This report must provide details of, in respect of each
Class of Business:(a) the product range;(b) any discretionary charges and benefits, options and guarantees, and reversionary bonus entitlements, where such features are included in a product;(c) reinsurance arrangements;(d) significant aspects of the recent experience of the Insurer, including, where relevant, a commentary on significant deviations of actual experience compared to the assumptions made in the previous valuation;(e) the Actuary'sestimate of the value of Long-Term Insurance Liabilities, determined in accordance with PIN chapter 5;(f) the method and assumptions used by the Actuaryin the valuation process, including, where relevant, a commentary on significant differences between the assumptions used and recent actual experience of the Insurer;(g) any expense reserves, mismatching reserves and any other special reserves included by the Actuaryin the value of the Long-Term Insurance Liabilities, or recommended by the Actuaryto be maintained, although not included in the valuation;(h) a determination of the value of surplus in the Long-Term Insurance Fund, before any distribution of such surplus;(i) a description of the Invested Assetsused to determine the risk-adjusted yield on which the discount rate used in the valuation was based;(j) the adequacy and appropriateness of data made available to the Actuaryby the Insurer;(k) procedures undertaken by the Actuaryto assess the reliability of the data;(l) the model or models used by the Actuary;(m) the approach taken to estimate the variability of the estimate;(n) the sensitivity analyses undertaken;(o) any significant changes to the matters reported on during the period since the previous valuation, including, in the case of the matters referred to in (f), and otherwise, where relevant, an estimate of the effect of these changes on the Long-Term Insurance Liabilitiesas at the Reference Date; and(p) commentary on any other factors affecting the valuation.
PIN 7.3.6 Guidance1. The assumptions and comparisons referred to in PIN Rule 7.3.6(d) and (f) should cover all significant components of the valuation, including consideration of persistency, mortality, expense levels, and investment returns.2. Where the business of the Insurer includes participating
Long-Term Insurance Business, it will be necessary for the determination at PIN Rule 7.3.6(h) to deal separately with surplus for the purposes of a decision on allocation of bonuses and surplus for the purposes of determining the capital adequacy of the Fund. For the former of these two purposes, the insurer is identifying the pool, commonly known as surplus, that is available for allocation as bonuses (or equivalent) on participating policies. The allocation then reduces the surplus (note — by convention, this is treated as happening as at the reporting date). By contrast, for the latter of the two purposes, that portion of the remaining surplus that is expected to be allocated eventually to policyholders is also treated as a liability (in PIN Rule 5.6.7), on the grounds that it is not available to absorb losses of the Insurer. For that purpose, declaration of bonuses merely represents a transfer from one recognised liability to another.3. Factors that the Actuaryshould consider for the purposes of PIN Rule 7.3.6(p) may include risks that may vary between the jurisdictions in which business is carried on, as well as generic risks. The former category might include the risk of political unrest, and the latter operational risks such as fraud.4. The DFSAmay specify additional information to be presented in the Actuary'sreport. PIN 3.6.1 Guidance indicates that, where the DFSApermits an Insurerto carry on Direct Long-Term Insurance Businesswith features of a kind described in PIN Rule 3.6.1(1), it may, as a condition of that permission, require additional information to be provided in the Actuary'sreport. That additional information could include, for example, detail on market-consistent valuations of guarantees or options, and the results of scenario testing.
Subject to PIN Rule 7.3.8, where an
Insurercarries on Direct Long-Term Insurance Business, the report referred to in PIN Rule 7.3.5 must include the information set out in PIN Rule 7.3.6 in respect of such business segregated by the jurisdiction in which it is carried on.
Where business in a jurisdiction is of limited significance, disclosures may, at the discretion of the
Actuary, be aggregated for those jurisdictions.
PIN 7.4 PIN 7.4 Additional provisions relating to the report
When appointing an
Actuaryto prepare a report under PIN section 7.2 or PIN 7.3, an Insurermust ensure that there is an agreement in writing which legally binds the Actuaryin accordance with the following provisions:(a) the contract must require the Actuaryto prepare his report in accordance with the provisions of PIN section 7.2 or PIN 7.3 as the case may be;(b) the contract must require the Actuaryto prepare the report using assumptions and methods that are, in the opinion of the Actuary, appropriate for the purposes of the report;(c) the contract must require the Actuaryto deliver the report to the Insurer'sdirectors within such time as to give the directors a reasonable opportunity to consider and use the report in preparing the Insurer's Annual Regulatory Returnfor the reporting period ended on the reporting date;(d) the contract must require and permit the Actuaryto address the directors of the Insurerif the Actuarybelieves that there is a matter relating to the financial position or operations of the Insurerthat should be brought to the attention of the directors; and(e) the contract must require and permit the Actuaryto address the DFSAif the Actuarybelieves that a matter brought to the attention of the directors of the Insureris not adequately dealt with by bringing it to the attention of the directors.
PIN 7.4.2(a) keep the
Actuaryinformed of the Insurer'sbusiness and other plans;(b) ensure that the Actuaryis fully informed of the Rulesin PINapplicable to the Insurer, as well as any other information that the DFSAhas provided to the Insurerthat may assist the Actuaryin performing his duties; and(c) ensure that the Actuaryhas access at appropriate times to all relevant data and people which the Actuaryreasonably believes is necessary to fulfil his obligations to the Insurerin respect of this chapter.
Insurermust submit the reports referred to in PIN section 7.2 and PIN section 7.3 to the DFSA, at the same time as it submits its Annual Regulatory Returnfor the reporting period ended on the reporting date.
Insureris not a DIFC Incorporated Insurer, a report prepared under section PIN 7.2 or PIN 7.3 must deal separately with the DIFC Insurance Businessof the Insurer, and the Insurance Businessof the Insureras a whole.
PIN 7.4.5 PIN 7.4.5
Abbreviated details may be provided in a report prepared under the requirements of this chapter in respect of a
Class of Businessthat is not material.
PIN 7.4.5 Guidance
For the purposes of PIN Rule 7.4.5, a
Class of Businessthat accounts for less than ten per cent of the Insurer's Net Written Premiumin the reporting period ended on the reporting date and that accounts for less than ten per cent of the Insurer's Insurance Liabilitiesas at the reporting date, will normally be considered immaterial.
PIN 7.5 PIN 7.5 Qualifications of the actuary
PIN 7.5.1 PIN 7.5.1
Actuaryappointed to provide an actuarial report under this chapter must:(a) have experience in the determination of liabilities in the Classes of Businessdealt with in the actuarial report; and(b) have the required skill and experience to perform his functions under the DIFCregulatory system.
PIN 7.5.1 Guidance
Rulesdo not require an Insurerto use the same Actuaryfor all reports. An Insurermay provide separate reports, prepared by more than one Actuary, where the Insurerundertakes different Classes of Business, provided that each Actuaryis appropriately qualified for the Classes of Businesson which he reports. Similarly, an Insurermay appoint different Actuaries, each appropriately qualified, to provide reports in respect of Insurance Businessconducted in or in respect of different geographical locations, for example DIFC Insurance Businessand other Insurance Business.
Insurermust notify the DFSAin writing of the name, professional qualifications and relevant experience of each person that the Insurerproposes to appoint to provide an actuarial report under this chapter.
DFSAmay, if it does not believe that the Actuaryproposed by the Insurerpossesses the qualifications set out in PIN Rule 7.5.1, notify the Insurerin writing that another Actuarymust be appointed.
Insurermust notify the DFSA immediately on the termination or resignation of its Actuary, giving the reasons for such termination or resignation.[Added] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]