An effective actuarial function must be well resourced and properly authorised and staffed as it plays a major role in the Company's overall system of Risk Management and Internal Controls. The actuarial function conducts all the actuarial undertakings per Article (10) of the Regulation, which must include, among other undertakings, the following: |
| 1. | Applying methodologies and procedures to assess the sufficiency of the Company's liabilities, including policy provisions and aggregate claim liabilities, as well as determination or reserves for financial risks and to ensure that their calculation is consistent with the requirements set out in the Financial Regulations. This must also include assessing the uncertainty associated with the estimates made in the calculation of the Company's liabilities;
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| 2. | Asset liability management with regards to the adequacy and the sufficiency of assets and future revenues to cover the Company's obligations to policyholders and capital requirements, as well as other obligations or activities;
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| 3. | Reviewing the Company's investment policies and completing the valuation of assets;
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| 4. | The solvency position of the Company, including a calculation of minimum capital required for regulatory purposes and liability and loss provisions;
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| 5. | Advising on the Company's prospective solvency position by conducting capital adequacy assessments and Stress Tests under various scenarios, and measuring their relative impact on assets and/or liabilities, and actual and future capital levels;
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| 6. | Developing risk assessment and management policies and controls relevant to actuarial matters or the financial condition of the Company;
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| 7. | Ensuring the fair treatment of policyholders with regard to distribution of profits awarded to them, when their policies contain elements of bonus/dividend.
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| 8. | Ensuring the adequacy and soundness of underwriting policies, which must at least include conclusions on the following matters:
| a. | Sufficiency of the premiums to be earned to cover future claims and expenses, taking into consideration the underlying risks (including underwriting risks), and the impact of options and guarantees included in insurance and reinsurance contracts;
| | b. | The effect of inflation, legal risk, change in the composition of the Company's portfolio, and of systems which adjust the premiums policy-holders pay upwards or downwards depending on their claims history (bonus-malus systems) or similar systems, implemented in specific homogeneous risk groups; and
| | c. | The progressive tendency of a portfolio of insurance contracts to attract or retain insured persons with a higher risk profile (anti-selection).
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| 9. | The development, pricing and assessment of the adequacy of reinsurance arrangements must include analysis of the following matters:
| a. | The Company's risk profile and underwriting policy;
| | b. | Reinsurance providers, taking into account their credit standing;
| | c. | The expected cover under stress scenarios in relation to the underwriting policy; and
| | d. | The calculation of the amounts recoverable from reinsurance contracts and special purpose vehicles, if any.
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| 10. | Product development and design, including the terms and conditions of insurance contracts and pricing, along with estimation of the capital required to underwrite the product;
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| 11. | Ensuring the sufficiency, accuracy and quality of data, the methods and the assumptions used in the calculation of technical provisions and ensure that any limitations of data used to calculate technical provisions are properly dealt with;
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| 12. | Comparing best estimates against experience, review the quality of past best estimates and use the insights gained from this assessment to improve the quality of current calculations. The comparison of best estimates against experience shall include comparisons between observed values and the estimates underlying the calculation of the best estimate, in order to draw conclusions on the appropriateness, accuracy and completeness of the data and assumptions used as well as on the methodologies applied in their calculation.
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| 13. | Reporting to the Board and Senior Management on the calculation of the Company's insurance liabilities which must include at least a reasoned analysis on the reliability and adequacy of their calculation and on the sources and the degree of uncertainty of the estimates. That reasoned analysis shall be supported by a sensitivity analysis that includes an investigation of the sensitivity to each of the major risks underlying the obligations which are covered in the Company's liabilities. The actuarial function shall clearly state and explain any concerns it may have concerning the adequacy of Company's liabilities.
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| 14. | The actuarial function must produce a written report to be submitted to the Board, at least annually. This report must document all of the tasks that have been undertaken by the actuarial function and a summary of their results, and must clearly identify any deficiencies and give recommendations as to how such deficiencies must be remedied.
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| 15. | Any other actuarial or financial matters determined by the Board.
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