Regulatory Framework and Compliance Flashcards

Under the CAS Qualification Standards, what is required for a US-based actuary to issue a Statement of Actuarial Opinion on property/casualty loss reserves?

Answer: Membership in the CAS (ACAS or FCAS) plus relevant continuing education

The CAS Qualification Standards require actuaries signing reserve opinions to be CAS members (ACAS or FCAS) and to have met relevant basic education and continuing education requirements for the specific practice area.

What is the primary actuarial concern with 'loss reserve discounting' under Statutory Accounting Principles for property-casualty insurers?

Answer: SAP generally prohibits discounting of P&C reserves to maintain conservatism, with limited exceptions

SAP generally does not permit discounting of unpaid loss reserves for property-casualty lines (with narrow exceptions like workers' comp tabular reserves) because undiscounted reserves are more conservative and protective of solvency.

Which of the following is NOT a typical component of the NAIC's Financial Analysis Solvency Tools (FAST) system used in off-site surveillance?

Answer: On-site market conduct examination schedules

FAST is an off-site financial analysis tool using ratio tests and scoring to prioritize insurers for regulatory attention; on-site market conduct examination scheduling is a separate regulatory function.

In the context of reinsurance regulation, what is 'credit for reinsurance' and why does it matter to ceding companies?

Answer: The ability of a ceding insurer to reduce its statutory reserves by the amount recoverable from reinsurers

Credit for reinsurance allows a ceding company to reduce its gross loss reserves by reinsurance recoverables on its statutory balance sheet, improving apparent solvency; unauthorized reinsurers must post collateral to receive this treatment.

A state insurance regulator issues a 'cease and desist order' against an insurer. What does this regulatory action typically accomplish?

Answer: It orders the insurer to stop a specific practice or activity found to violate insurance law

A cease and desist order is a regulatory directive requiring an insurer to immediately stop engaging in a specific unlawful practice, without necessarily revoking its license or initiating liquidation.

Under the Terrorism Risk Insurance Act (TRIA), what is the primary role of the federal government in terrorism risk coverage?

Answer: The federal government acts as a reinsurer of last resort, sharing losses above insurer deductibles after a certified act of terrorism

TRIA established a federal backstop where the government shares commercial property-casualty terrorism losses above mandatory insurer retention levels after Treasury certifies an act of terrorism, making coverage available and affordable.

Which actuarial document must accompany the loss reserve exhibit in a property-casualty insurer's Annual Statement filed with state regulators?

Answer: Statement of Actuarial Opinion (SAO) signed by a Qualified Actuary

State insurance regulations require a Statement of Actuarial Opinion on loss and LAE reserves signed by a Qualified Actuary to accompany the property-casualty Annual Statement, attesting to reserve adequacy.