Guidance Note - Actuary's Opinion on EBS Technical Provisions

Summary

This Guidance Note sets out the Bermuda Monetary Authority's expectations for the appointment, approval and role of Actuaries who provide the annual Actuary's Opinion on the Technical Provisions (TPs) shown in an insurer's Economic Balance Sheet (EBS). It applies to Class 3A, 3B, 4, C, D and E insurers and to insurance/reinsurance groups, covering both the Loss Reserve Specialist and Approved/Group Actuary roles.

• Appointment and approval: Insurers required to appoint an Actuary must apply in writing to the Authority for approval of candidates; approval is specific to that insurer and contingent on fit and proper criteria.
• Fit and proper criteria: Candidates must be qualified members in good standing of a recognised actuarial body, meet education/experience and continuing professional development requirements, have relevant TP evaluation experience, and be free of conflicts of interest.
• Application documentation: Applications must include a cover letter, letter of resignation from the outgoing Actuary (if applicable), a letter of undertaking and acceptance from the candidate, a resume, and evidence of good standing from the credentialing body.
• Notification duties: Insurers must notify the Authority in writing of any material changes to information in an Actuary's application after approval, and of any change in Actuary.
• Role and independence: The appointed Actuary must have direct access to the board (or parent board for groups) without management review, and must have a right to information from the insurer to perform the engagement.
• Actuary's Opinion content: The Opinion must state whether the aggregate TPs in the EBS are reasonable, following accepted actuarial practice and the EBS valuation principles and communication requirements set out in the Guidance Note.
• Resignation: An Actuary who resigns, or an insurer replacing its Actuary, must provide a letter of resignation using the template format referenced in the appendices.

The Note also provides template letters (cover letters, undertaking and acceptance letters, and resignation letters) for use by Loss Reserve Specialists, Approved Actuaries and Group Actuaries when seeking or relinquishing appointment.

Key obligations

• Insurers required to appoint an Actuary must apply in writing to the Authority for approval of the candidate before appointment.
• Applications for Actuary approval must include a cover letter, letter of resignation from the current Actuary (if applicable), letter of undertaking and acceptance, resume, and evidence of good standing with the credentialing actuarial body.
• Insurers must forthwith provide written notice to the Authority of any material changes to information in an Actuary's application after approval.
• The insurer's cover letter must confirm the appointed Actuary can communicate directly with the board without management review, and that the board has direct access to the Actuary.
• The Actuary's Opinion on the reasonableness of aggregate Technical Provisions in the EBS must be provided to the Authority annually.
• An Actuary must provide a letter of resignation, using the prescribed template, at the time of resigning from the role.
• The candidate Actuary must undertake to perform functions in accordance with Schedule XV of the Prudential Standards Rules and their credentialing body's professional standards, and must meet continuing professional development requirements.

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 the EBS Technical Provisions must be provided annually with the Statutory Economic Balance Sheet.
• forthwith: Insurer must provide written notice to the Authority of material changes to an Actuary's application information after approval.