CIA CSOP

Question 1

What is the purpose of CIA/CICA Joint Policy Statement? (3)

Answer 1

RELIANCE: of the auditor & actuary on each other’s work
INTERACTION: between auditor & actuary
DISCLOSURE of responsibilities of auditor & actuary

Question 2

Define enquiring professional.

Answer 2

A professional who relies on the work of another (the responding professional) in the course of their own work.

Question 3

Define responding professional.

Answer 3

A professional whose work is being used by another (the enquiring professional).

Question 4

Responsibility of the management regarding the Financial Statement (F/S) according to JPS.

Answer 4

Management has overall responsibility for the F/S (this may include amounts determined by the actuary).

Question 5

Responsibility of the actuary regarding the Financial Statement (F/S) according the JPS.

Answer 5

• the actuary IS responsible for reliable and sufficient data
• the actuary IS NOT responsible for data integrity or controls (may enquire of auditor regarding these items)

Question 6

Responsibility of auditor regarding the Financial Statement (F/S) according to JPS.

Answer 6

• auditor IS responsible for the fairness with which the B/S represents the financial position, operations, cash flows, etc.
• auditor IS NOT responsible for the actuarial valuation (may enquire of the actuary regarding valuation)

Question 7

Required actions for enquiring professional when communicating with responding professional. (3)

Answer 7

NOTIFY RP that work is being used
NOTIFY RP regarding needs: materiality, subsequent events, timing
REQUEST CONFIRMATION of RP’s appointment, professional standing, observance of standards

Question 8

Required actions for responding professional when communicating with enquiring professional. (3)

Answer 8

CONFIRM that work will be done
CONFIRM appointment, professional standing, observance of standards
NOTIFY EP of problems meeting EP’s needs

Question 9

Define claims liability.

Answer 9

It is the PV of claims, their related expenses, and taxes @ B/S (balance sheet) date that were incurred before B/S date.

Question 10

Considerations in estimating claims & premium liabilities. (5)

Answer 10

• U/W practices
• claims handling practices
• reinsurance
• data processing systems
• accounting systems

Question 11

Define premium liability.

Answer 11

It is the PV of claims, their related expenses, taxes, and premium development Minus DPAE (Deferred Policy Acquisition Expenses) @ B/S (balance sheet) date incurred AFTER B/S date on policies in-force ON/EARLIER than B/S date.

Question 12

When may MfAD(claims) be above range? (3)

Answer 12

• unusually high uncertainty
• when PfAD is already very low because best estimate of claims liability is very low
• when stochastic methods indicates variability not identified using deterministic methods

Question 13

When may MfAD(claims) be below range? (3)

Answer 13

• when LOB has been COMMUTED to reinsurer and is in runoff
• for LOB with pre-set payments (eg: structured settlement)
• insurer has stop-loss coverage reserved at stop-loss limit

Question 14

When may MfAD(inv) be below rage?

Answer 14

When the best estimate of the discount rate (based on the insurer’s assets) is already below 25bps.

Question 15

What is the scope of CSOP 2600 (Consolidated Standards of Practice on Ratemaking) regarding derivation & recommendation of rates?

Answer 15

• derivation of rates: within scope

- recommendation of rates: not within scope