Guidance Note - Group Actuary's Opinion (January 2014)

Summary

This BMA Guidance Note explains the Authority's expectations regarding the Group Actuary (GA) function required under the Insurance (Group Supervision) Rules 2011. It covers the fit and proper criteria and approval process for appointing a Group Actuary, and sets out the role, independence requirements and expected content of the annual Group Actuary's Opinion (GAO) on the adequacy of an insurance group's Insurance Reserves.

• Appointment and approval: The designated insurer of an insurance group must appoint a GA under Section 27G of the Act, subject to BMA approval; the group must apply in writing with supporting documentation (cover letter, resignation letter from outgoing GA, letter of undertaking and acceptance, resume, and evidence of professional standing).
• Fit and proper criteria: The proposed GA must be a qualified member in good standing of a recognised actuarial body, meet continuing professional development and experience requirements, and be free of actual, potential or perceived conflicts of interest.
• Independence and disqualifications: Certain individuals, such as C-suite officers, directors (with limited exceptions), underwriting/claims authority holders, and those with personal financial ties to key persons, will generally not be approved as GA; compensation must not compromise independence.
• Notification duties: The insurance group must notify the Authority in writing of material changes to information in the GA application after approval, and must follow the required process (including resignation and replacement documentation) when changing GA.
• Role and reporting: The GA must render an annual opinion, submitted with the Group Statutory Financial Return, on the adequacy of the group's aggregate insurance liabilities (Lines 17(d) and 27(d)), following accepted actuarial practice, addressing materiality and adverse deviation, disclosing reliance on other actuaries, and retaining work papers available in Bermuda upon the Authority's request.
• Communication: The GA must be able to communicate directly with the parent board without management review, and the parent board must have direct access to the GA.

The guidance builds on other BMA guidance notes concerning actuarial professionals and is expected to evolve over time; ultimate responsibility for compliance with the Act and Group Rules rests with the insurance group.

Key obligations

• The designated insurer of an insurance group must appoint a Group Actuary approved by the Authority under Section 27G of the Act.
• The insurance group must apply in writing to the Authority for approval of its GA candidate, including a cover letter, letter of resignation from the current GA (if applicable), letter of undertaking and acceptance from the candidate, resume, and evidence of professional standing.
• The insurance group must forthwith provide written notice to the Authority of any material changes in the information included in the GA application subsequent to approval.
• The Group Actuary's Opinion must be provided annually together with the Statutory Financial Return.
• The GA opinion must state whether the aggregate liabilities of the group in relation to insurance business are adequate as at the end of the relevant year.
• The insurance group must ensure the appointed GA can communicate directly with the parent board without management review, and that the parent board has direct access to the GA.
• Where the group appoints an internal GA, it must ensure the GA's compensation does not compromise independence.
• The GA must disclose reliance on the opinion of other actuaries, evaluate the appropriateness of such reliance, and disclose the identity and qualifications of persons relied upon.
• The GA must maintain work papers, analyses and actuarial reports sufficient to enable an independent review, and make them available in Bermuda upon the Authority's request.

Applies to

insurance groups, designated insurers, Group Actuaries, insurers, reinsurers

Deadlines

• annually: The Group Actuary's Opinion must be provided annually together with the Group Statutory Financial Return.
• forthwith: The insurance group must notify the Authority in writing of material changes to GA application information after approval.