ICA.Ch47

Question 1

Duties of the audit committee (REVIEWS)

Answer 1

• Review annual statement before Board of Director approval
• Review such company returns as superintendent may specify
• Review investments & transactions with material adverse events brought to audit committee

Question 2

Dutes of audit committee (REQUIRE)

Answer 2

• Require management to implement & maintain internal control procedures

Question 3

Duties of audit committee (MEETINGS)

Answer 3

• Meet with auditor: discuss the Annual Report
• Meet with actuary: discuss parts of Annual Report prepared by actuary
• Meet with chief internal auditor: discuss effectiveness of internal controls

Question 4

Items Board of Directors must present to shareholders & policyholders at Annual General Meeting (5)

Answer 4

• Financial Statements for most recent 2 years
• Auditor’s report
• Actuary’s report
• Description of roles for auditor & actuary
• Anything else required by the by-laws of the company

Question 5

CEO, COO can’t be AA unless

Answer 5

• Authorized by OSFI
• Expiration of authorization is specified therein (but cannot exceed 6 months)

Question 6

Can CFO also be the Appointed Actuary?

Answer 6

Yes, if:
- Audit committee writes to Superintendent that duties of CFO & AA can be adequately & independently performed
- Superintendent authorized appointment

(if full explanation required)
Must also be an FCIA in good standing
Must also be familiar with the SOP and legislation

Question 7

Briefly describe 4 ways an actuary may cease to be the Appointed Actuary

Answer 7

• Appointment revoked by Board of Directors
• Resignation
• Death
• The person ceases to be an actuary (Ex: FCIA designation revoked due to disciplinary action)

Question 8

What must Board of Directors do upon AA vacancy?

Answer 8

Notify OSFI & fill vacancy

Question 9

What must AA do upon revocation/resignation

Answer 9

Send written statement to board of directors and OSFI regarding the reason & circumstance of resignation

Question 10

What must prospective replacement of the AA do?

Answer 10

Request written report on circumstances & reasons for prior AA leaving

• If not received in 15 days, new AA appointment may simply be accepted

Question 11

AA’s right to information & protection from liability

Answer 11

AA may request records & explanations from:
- Board of Directors
- Officers
- Employees

AA can’t be liable for such good faith requests

Question 12

Reporting requirements of AA to BoD

Answer 12

• Provide report on current/expected Financial Position (annually)
• Provide report on current Financial Condition, usually FCT

Question 13

Reporting requirements of AA to CEO

Answer 13

• Report on MAE (Material Adverse Events) that require rectification - (CEO, CFO, cc: BoD)

Question 14

If no suitable action by company on Material Adverse Events

Answer 14

• Send original report on MAE (Material Adverse Events) to OSFI
• Also send a copy to the BoD

Question 15

What is qualified privilege

Answer 15

IF
- AA makes good faith report under (363, 369)

THEN
- AA won’t be liable in civil action seeking indemnification

Recall:
- 363: pertains to report from outgoing AA
- 369: pertains to report on MAE (Material Adverse Events)

Question 16

Requirements for foreign companies (before issuing insurance) (6)

Answer 16

Asset Requirements:
- Must have assets greated than 5M vested in trust (or an amount per superintendent)
- Must have asset vested in Canada and controlled by Chief Agent or Minister of Finance
- Must have minimum MCT / BAAT ratio

Other requirements:
- Must appoint an actuary & auditor
- Must establish chief agency
- Any other conditions superintendent deems appropriate