Guidance Note #10: Role of the Approved Actuary (March 2005)

Summary

This Guidance Note from the Bermuda Monetary Authority's Insurance Department explains the eligibility, appointment and reporting role of the Approved Actuary for insurers registered as Long-term insurers under the Insurance Act 1978 (as amended). It sets out when an Approved Actuary's opinion is required, what that opinion must cover, and the minimum content and structure expected in the actuary's report.

• Appointment: Long-term insurers must appoint an actuary and obtain the Authority's approval of the candidate via written application.
• Notification of changes: Insurers must notify the Authority in writing within 14 days of any change to information in the Approved Actuary application, or of a change in Approved Actuary and the reasons for it.
• Resignation or revocation: An Approved Actuary who resigns early or whose appointment is revoked must, where relevant circumstances exist, give the Authority written notice within 14 days.
• Letter of undertaking: Any new candidate for Approved Actuary must provide the Authority with a letter undertaking to perform duties in accordance with the Act and relevant professional standards.
• Actuarial opinion required: An opinion on the adequacy of Total Long-term Business Reserves must accompany the insurer's annual statutory return, before certain dividend payments or asset transfers out of the long-term fund, following an Authority-directed valuation, and as part of any scheme of transfer of long-term business.
• Working papers and information access: The Approved Actuary must retain supporting reports, records and documents (electronic or paper) sufficient for independent review, make them available in Bermuda on the Authority's request, and insurers must give the actuary reasonable access to information.
• Report content: Each communication of the Approved Actuary's opinion should follow eight described sections: identification, scope, conditions and limitations, review and verification of data, expression of opinion, relevant comment, work papers, and signature.

The Authority treats the Guidance as the minimum standard expected of Approved Actuaries. For matters arising from changes made by the Insurance Amendment Act 2004, actuaries must come into immediate compliance; for other matters covered by the Guidance, compliance is expected as soon as possible and no later than 31 December 2005 unless a later date is agreed with the Authority.

Key obligations

• Long-term insurers must appoint an actuary and have the appointment approved in writing by the Authority.
• Insurers must notify the Authority in writing within 14 days of any change to information in an Approved Actuary application.
• Insurers must notify the Authority in writing within 14 days of a change in Approved Actuary and the reasons for the change.
• An Approved Actuary who resigns before term expiry (where relevant circumstances exist) must give the Authority written notice within 14 days.
• An Approved Actuary whose appointment is revoked (where relevant circumstances exist) must provide the Authority a written statement within 14 days.
• A new candidate for Approved Actuary must provide the Authority a letter of undertaking to perform functions per the Act and relevant professional standards.
• Long-term insurers must include an Approved Actuary's opinion on the adequacy of Total Long-term Business Reserves with their annual statutory return.
• Before declaring a dividend to a non-policyholder or moving assets out of the long-term segregated fund, a long-term insurer must obtain an Approved Actuary's opinion on reserve adequacy.
• Where the Authority directs a valuation of long-term liabilities, the insurer must include an Approved Actuary's opinion on the valuation's adequacy.
• A petition to transfer long-term insurance business must be accompanied by an Approved Actuary's report on the scheme.
• The Approved Actuary must retain relevant reports, records and documents and make them available for review in Bermuda if requested by the Authority.
• Insurers must make reasonable arrangements, including promptly complying with information requests, to enable the Approved Actuary to complete assigned responsibilities.
• The Approved Actuary's communicated opinion must follow the eight-part minimum content structure (identification, scope, conditions and limitations, data review, expression of opinion, relevant comment, work papers, signature).
• Insurers must disclose in notes to statutory financial statements the method of calculating amounts under Lines 20 to 26 and the method and range of key interest rates and mortality factors used for Line 22.

Applies to

Long-term insurers registered under the Insurance Act, Approved Actuaries approved by the Bermuda Monetary Authority

Deadlines

• within 14 days of becoming aware of changes: Insurer must notify the Authority in writing of changes to information in the Approved Actuary application.
• within 14 days of the decision to effect a change: Insurer must notify the Authority in writing of a change in Approved Actuary and the reasons.
• within fourteen days: Approved Actuary must give written notice (resignation letter) to the Authority following early resignation, where relevant circumstances exist.
• within fourteen days: Approved Actuary must provide a written statement to the Authority following revocation of appointment, where relevant circumstances exist.
• not later than 31 December 2005 (or a later date agreed with the Authority): Deadline for Approved Actuaries to come into compliance with other (non-2004-Amendment-Act) matters in the Guidance.