Guidance Note - Actuary's Opinion on EBS Technical Provisions (May 2016)

Summary

This Guidance Note sets out the Bermuda Monetary Authority's expectations for the appointment, approval and professional conduct of Actuaries who provide the annual Actuary's Opinion (AO) on an insurer's Technical Provisions (TPs) within the Economic Balance Sheet (EBS). It covers the fit and proper criteria and approval process for Actuaries, as well as the substantive content expected in the Opinion itself.

• Scope: Applies to all commercial insurers and insurance groups in Class 3A, Class 3B, Class 4, Class C, Class D and Class E, and to the Loss Reserve Specialist, Approved Actuary or Group Actuary they appoint.
• Appointment and approval: Insurers must appoint an Actuary and apply in writing to the Authority for approval of the candidate, supported by a cover letter, resignation letter from the outgoing actuary, letter of undertaking and acceptance, resume and credentialing evidence.
• Fit and proper criteria: The Authority assesses integrity, competency, qualifications, continuing professional development, relevant experience and independence/conflict of interest before approving an Actuary.
• Ongoing notification duties: Insurers must notify the Authority in writing of material changes to information in an approved Actuary's application, and of any change in Actuary.
• Content of the Opinion: The AO must state whether the aggregate TPs shown in the EBS are reasonable, addressing best estimate, materiality, adverse deviation, reliance on other actuaries, and must be signed with the actuary's designation and contact details.
• Work papers: Actuaries must be able to make underlying actuarial reports, analyses and reconciliations available in Bermuda upon the Authority's request, sufficient for an independent review by another qualified actuary.

The guidance is not exhaustive and does not itself prescribe how TPs are calculated; it focuses on the actuarial appointment/approval process and the expected form and content of the annual Opinion. The Authority may revise the Guidance Note from time to time, publishing material changes through updated versions.

Key obligations

• Insurers required to appoint an Actuary must apply in writing to the Authority for approval of their candidate(s), including a cover letter, resignation letter, letter of undertaking and acceptance, resume and credentialing evidence.
• The Actuary's Opinion on TPs must be provided to the Authority annually together with the Statutory Economic Balance Sheet (EBS).
• Insurers must give the Authority prompt written notice of any material changes to information in an Actuary's approved application.
• Insurers must provide a letter of resignation from the current Actuary when proposing a change of Actuary.
• The appointed Actuary must have direct, unimpeded access to the board (or parent board for groups) without management review or approval.
• Actuaries must ensure work papers, actuarial reports and reconciliations are available in Bermuda upon the Authority's request, sufficient to support an independent review of the Opinion.
• The Actuary's Opinion must address best estimate, reasonableness, materiality and adverse deviation (for general business), disclose reliance on other actuaries' opinions where applicable, and be signed with professional designation and contact information.

Applies to

Class 3A insurers, Class 3B insurers, Class 4 insurers, Class C insurers, Class D insurers, Class E insurers, Insurance Groups, Loss Reserve Specialists, Approved Actuaries, Group Actuaries

Deadlines

• annually: The Actuary's Opinion on Technical Provisions is to be provided annually together with the Statutory Economic Balance Sheet (EBS).
• forthwith: Insurer must provide written notice to the Authority of any material changes to information in an Actuary's approved application.