Response to Industry Comments - GN Actuary's Opinion on EBS Technical Provisions (2017-12-07)

Summary

This is a Bermuda Monetary Authority (BMA) notice responding to industry comments received on its Consultation Paper proposing updates to the Guidance Note on the Actuary's Opinion on EBS Technical Provisions. It clarifies the Authority's expectations for how actuaries should prepare and structure their Opinions on Technical Provisions under the Economic Balance Sheet (EBS) regime, following feedback from the 2016 year end statutory filing cycle.

• Reserving thought process: The wording change from reserving process to reserving thought process is a clarification only; it confirms the Opinion addresses the Actuary's own reasoning process, not the insurer's reserving process.
• Discount unwind: Actuaries must give an overview of the methodology used to unwind any pre existing discount before applying the risk free discount rate, but need not state the actual amount of the unwinding.
• Immaterial calculation steps: The Authority expects the Opinion to reference all calculation steps used in deriving Technical Provisions, even immaterial ones, though the depth of discussion can vary with materiality.
• Opinion structure (paragraph 57c): The structure of Actuarial Opinions should not change due to the paragraph 57c revision; items should generally be discussed in the Parts/order set out in the Guidance, with cross references where this is not followed.

The notice does not introduce new legal requirements but clarifies existing expectations under the Guidance Note on the Actuary's Opinion on EBS Technical Provisions, which remain in force for insurers' statutory filings.

Key obligations

• Actuaries preparing the Opinion on EBS Technical Provisions must address the Actuary's own reserving thought process, not the insurer's reserving process.
• Actuaries must provide an overview of the methodology used to unwind any pre existing discount before applying the risk free discount rate.
• Actuaries must reference all calculation steps used in deriving Technical Provisions, including immaterial ones, with depth of discussion proportionate to materiality.
• Opinions should follow the Parts/order set out in the Guidance Note, with cross references provided where an item is discussed elsewhere in the Opinion.

Applies to

insurers, actuaries providing Actuary's Opinions on EBS Technical Provisions