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.