Service 1 - Formula Reserves
Formula reserves must be established with respect to full or partial (secondary) guarantees stated in policies and contracts. Our review procedures include such of the following activities required by the client:
-
Preparatory: Interview principals & identify regulatory scope/framework. Review work papers & product descriptions. Breakdown reserve aggregation & identify material reserves & risk factors.
-
Contracts & Statutes (Methodology): Read sample contracts & guarantee provisions. Ascertain reserve methods & assumptions (methodology). Verify consistency of methodology with statutory minimum and contract guarantees. Review applicable laws, regulations, and actuarial standards of practice.
-
Sampling & Analytics: Obtain sample reserve factors. Compare with reserve calculated from first principles. Perform aggregate reserve trend analysis & other consistency checks.
Service 2 - Asset Adequacy Analyses
Cash flows from assets allocated to support life and annuity reserves in combination with premium cash flows should demonstrate to provide adequately for future liabilities (benefits and expenses) in material business segments. Such demonstration supports the appointed actuary's reserve opinion.
We review the entity's asset adequacy analysis for designated product lines, develop an understanding of the entity's economic and embedded risks, and determine the extent of consistency of methods, assumptions and results across product lines.
We also conduct high level review of the prior accounting period asset adequacy analyses results to determine the extant of consistency with current account period methods, assumptions and results.
Service 3 - Statutory & Economic RBC Capital Adequacy Analysis
Statutory capital requirement may include, in specified circumstances, required analysis pursuant to statutory C-3 Phase 1 and/or C-3 Phase 2 criteria in order to determine value of future liability cash flows that meet statutory likelihood criteria. Such analyses may result in added statutory balance sheet liability and/or statutory RBC contribution, and typically is derived through deterministic and/or stochastic processes.
The objective in such circumstance is the performance or alternatively the peer review of documented analyses in order to assure or ascertain the extent of consistency with statutory criteria, with the client's perspective of statutorily appropriate assumptions and results, and with Actuarial Standards of Practice.
We perform or alternatively review proprietary entity analyses, as appropriate, that supports statutory RBC & other capital adequacy requirements with material balance sheet implication. WE document and report the extent to which adequate provision is made in statutory balance sheet liabilities and/or statutory RBC with respect to such obligations.
Service 4 - Reinsurance Credits/Debits
Reinsurance reserve credits modify reported statutory balance sheet and income statement entries. The review objective is to verify risk transfer and the collectibility of amounts due with respect to reinsurance accounting credits and debits.
We conduct review of reinsurance transactions for which there are material reserve credits or debits, and the extent to which balance sheet liabilities with respect to such obligations comply with provisions of statute.
