Difference between revisions of "OSFI.MemoAA"

Latest revision as of 23:47, 4 August 2025

Reading: "Memorandum to the Appointed Actuary," 2024. Author: OSFI (Office of the Superintendent of Financial Institutions Canada)

Author: OSFI (Office of the Superintendent of Financial Institutions Canada)

Forum

BA Quick-Summary: Memorandum to the AA The memorandum outlines the required components of the Appointed Actuary’s Report (AAR) under IFRS 17, including documentation of methods, assumptions, and judgment used in valuing insurance liabilities. Actuaries must submit supplementary tables alongside the AAR, with strict filing deadlines to avoid penalties. The memorandum provides guidance on the transition from IFRS 4 to IFRS 17, requiring actuaries to disclose the methods and assumptions used in the transition, including any changes in discount rates, risk adjustments, and contract boundaries.

Pop Quiz

Study Tips

Use this wiki article as a reference but it's not a very interesting read! Ugh!

Much of the content of this reading is discussed in other readings pertaining the appointed actuary. As such, this reading might be a good review. It is long and detailed and there doesn't seem to be much testable material that hasn't already been covered elsewhere. If you completely skipped this reading, I honestly don't know if it would matter. (Just my guess.)

It might be a good idea to do the quizzes.
Pay special attention to the multiple choice questions on section 6 - there are 50 multiple choice questions spread over 4 Battle Cards within quiz #3.

Estimated study time: 2 hours (not including subsequent review time)

BattleTable

No past exam questions are available for this reading.

reference	part (a)	part (b)	part (c)	part (d)

In Plain English!

Section 1 - OVERVIEW

The Office of the Superintendent of Financial Institutions (OSFI) outlines requirements for the Appointed Actuary’s Report (AAR) under the Insurance Companies Act (ICA). The AAR is a detailed actuarial report given to regulators, discussing the suitability of actuarial and other policy liabilities in financial statements. It includes the actuary's opinion, backed by data and calculations. The report serves regulators, OSFI's actuaries and the insurer's management.

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Section 2 - GENERALLY ACCEPTED ACTUARIAL PRACTICE

Both the ICA and Guideline E-15 require the work of the AA to be in accordance with accepted actuarial practice. This fundamental requirement underpins all aspects of the appointed actuary's work. OSFI defines accepted actuarial practice as being embodied by Standards of Practice promulgated by the Actuarial Standards Board, supplemented by educational notes issued by the CIA. It's crucial to understand that educational notes are not exhaustive descriptions of accepted actuarial practice. Therefore, an AA's practice doesn't necessarily fall outside accepted practice solely because it isn't described in an educational note. The 2024 memorandum explicitly states that it contains no requirements that override or limit accepted actuarial practice in Canada. When AAs deviate from accepted practice or the memorandum's requirements, they must clearly identify and provide justification for such deviations.

Section 3 - OSFI'S REVIEW PROCESS

OSFI views the AAR as a critical input in assessing an insurer's financial resilience. The review process is thorough and may extend beyond initial filing. Upon reviewing the filed annual return and AAR, OSFI might decide to conduct further review and could request supplemental detail from the AA. The regulator reserves the right to reject assumptions or methods and request re-calculation using alternative approaches. The potential outcomes of OSFI's review are significant. Depending on findings, OSFI could require the AA to amend and re-file the AAR and annual return, reflect required changes in subsequent filings, or even require review from an independent actuary. OSFI expects the AA to respond promptly to all requests related to the AAR and annual return. This expectation of responsiveness underscores the collaborative nature of the regulatory review process.

Section 4 - REQUIRED CONTENTS OF THE AAR

The memorandum specifies comprehensive requirements for the AAR's contents, organized into major categories that ensure completeness and consistency across submissions.

4.1 Table of Contents

A well-structured table of contents serves dual purposes in the AAR. First, it provides users with an overview of the report's contents and organization, which is particularly valuable when extended to include major section headings. Second, it facilitates efficient navigation for users seeking specific information. The importance of a comprehensive table of contents cannot be overstated given the technical complexity and length of most AARs.

4.2 Identification of the AA and Peer Review Actuary

The AA should disclose whether they are an employee of the insurer or a consultant. This section must also identify:

The duration for which they have served as AA
Confirmation of compliance with continuing education requirements
The peer reviewer's identity and employer
The tenure of the peer reviewer with the insurer

This transparency helps establish the credibility and independence of the actuarial work performed.

4.3 Materiality

The AA must describe the materiality standard applied in their work and explain how they determined that amount. A critical requirement is comparing the AA's materiality to the external audit materiality, ensuring alignment between actuarial and audit perspectives on what constitutes material differences.

4.4 Expression of Opinion

The expression of opinion represents the core attestation of the AA's work. The AA should use the format specified in the CIA Standards of Practice, practice-specific standards for insurers. Any variation from this prescribed wording is considered a qualified opinion by OSFI. Key requirements for the opinion section include:

The AA's signature (which can be electronic)
The name of the AA (typed)
The date of signing
Alignment with opinions presented to shareholders and policyholders

For branches where the external auditor report isn't available when the AA renders their opinion, a qualified opinion conditional upon receiving an unqualified external auditor opinion must be issued.

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4.5 Changes That Influenced the Valuation

This critical section requires the AA to identify and describe various changes affecting the valuation. The scope is broad, encompassing changes in the external or internal environment, assumptions and methods, and other factors. Changes could involve:

Policies and strategies
Operations and business model
Leadership and organizational structure
Lines of business
Underwriting and claims processes

Specific areas requiring discussion where applicable include significant transactions or changes in reinsurance arrangements, investment strategy (particularly where discount rates use own assets as reference), changes in accounting policies, and policies relating to dividends and par block management for life insurers.

4.6 Product

The AA must identify major product lines and describe their significant characteristics. The level of detail should reflect the complexity and uniqueness of products. For instance, a life insurer's AA might provide extensive details for segregated fund or universal life products while being more concise about standard renewable term insurance. Similarly, P&C insurers might focus more on emerging cyber coverages than traditional home and auto lines.

4.7 Reinsurance Held

4.7.1 Reinsurance Arrangements

The AA must provide comprehensive descriptions of the insurer's reinsurance held, including:

Types of reinsurance
Products and key risks covered
Amount of risk ceded and coverage limits
Accounting standard applicable
Back-to-back reinsurance contracts

Significant reinsurance arrangements require particular attention - these are arrangements where either significant risk is transferred or significant assets/liabilities are carried. The AA must also discuss arrangements that don't cede insurance risk, unregistered reinsurance, related party arrangements, and internal reinsurance within corporate groups.

4.7.2 Accounting for Reinsurance Held Assets and Liabilities under IFRS 17

This section requires detailed description of reinsurance valuation, with particular focus on:

Provisions for non-performance risk
Embedded guarantees in funds withheld arrangements
Aggregate treaties (stop loss, catastrophe, etc.)
Differences from direct contracts in discount rates, risk adjustment, and other valuation elements

4.7.3 Other IFRSs

For reinsurance not accounted for under IFRS 17, the AA must identify the arrangements and describe how associated assets and liabilities are determined, including identification of applicable accounting standards.

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4.8 Data

The data section must describe the information used for valuation and notable year-over-year changes. Requirements vary by insurer type but share common themes of transparency and control. For P&C insurers, details must cover treatment of salvage and subrogation, loss adjustment expenses, and reinsurance in claims data. Life insurers must describe the basis for disability payment reductions related to government pension plans. Mortgage insurers need to detail cure and recovery treatment, loss adjustment expenses, and macroeconomic variables. The AA should describe the controls used to provide assurance over the adequacy of the data used in the valuation. This includes describing the extent to which the AA considers the external auditor's work and any instances where they don't rely on it.

4.9 Actual and Expected Experience

This section requires comparisons of actual to expected experience for significant assumptions used in measuring actuarial and policy liabilities. OSFI expects these comparisons to cover sufficient periods - ideally ten years for P&C and mortgage insurers and five years for life insurers. If data for these periods isn't available, the AA must explain the rationale for shorter periods and work toward meeting expectations.

4.9.1 Life Insurers

Life insurers must discuss actual versus expected experience for significant assumptions like mortality and policyholder behaviour, providing sufficient detail to demonstrate the reasonableness of current assumptions.

4.9.2 P&C and Mortgage Insurers

For P&C and mortgage insurers, comparison involves analyzing ultimate undiscounted loss estimates at current year-end versus prior year-ends. Analysis must be conducted by accident year and line of business. Key discussion points include:

Reasons for significant differences between estimates
Changes in methods or assumptions to minimize future development
Material differences between loss development in returns versus AAR comparisons
Quantification of differences in various exhibits

4.10 Methodology

The methodology section requires comprehensive disclosure of approaches used in the valuation. Key requirements include:

Identification of major accounting choices deviating from industry norms
Description of major estimation methods (development, expected, Bornhuetter-Ferguson for P&C; seriatim projections for life)
Discussion of probability-weighted cash flow determination methods
Description of discount rate construction and application
Explanation of risk adjustment determination and confidence levels
Details on insurer discretion in products like participating policies

For life insurers, additional requirements cover dividend determination, smooth mechanisms, valuation fund mapping for segregated funds, and bulk reserve determination.

4.11 Assumptions

The AAR should contain a description of key assumptions and how they are derived. This includes discussing the use of insurer data versus industry data, the review cycle for assumptions, and significant year-over-year changes with supporting rationale. The level of detail should reflect the materiality and complexity of each assumption.

4.12 Reliance on the Work of Others

AAs frequently rely on others' work in conducting valuations. Common areas include:

External auditor for data validation
Other AAs for pool valuations (e.g., Facility Association)
External auditor for IFRS 17 accounting choices
Other employees for non-actuarial assumptions (e.g., discount rates)

The AA must identify and describe significant reliances, expressly indicate acceptance of work performed by others, and note any reservations associated with that reliance.

4.13 Table of Exhibits and Appendices

Similar to the main table of contents, this table presents the organization and location of quantitative analyses comprising the valuation, providing crucial navigation assistance for technical users.

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Section 5 - ACTUARIAL CALCULATIONS SUPPORTING REGULATORY CAPITAL TESTS

For P&C and mortgage insurers, the memorandum requires specific support for regulatory capital calculations. The AA must provide information used to calculate and complete returns for the minimum capital test (MCT), branch adequacy of assets test (BAAT), or mortgage insurer capital adequacy test (MICAT). The AA should describe the information provided and details on how those amounts were determined. Appendices II and III of the memorandum provide detailed lists of required data elements, including various liability and asset measures, duration calculations, and risk adjustments by class of insurance.

Appendix I - FILING DIRECTIONS

The memorandum provides specific filing requirements and timelines that must be strictly followed:

Filing Timelines

AAR and supplementary tables: within 60 days of fiscal year-end
FCT report: earlier of 30 days after board presentation or one year after fiscal year-end
Pre-release peer reviews: follow same timelines as material reviewed
Post-release AAR peer reviews: within 30 days of AAR release
Post-release FCT peer reviews: by December 31

Filing Procedures

All reports must be filed electronically via the Regulatory Reporting System (RRS). Key requirements include:

Include signed expression of opinion in submission
Convert to PDF format (not scanned)
No security protection on files
Follow specified file naming conventions
No email submissions for security reasons

Failure to meet filing deadlines could result in penalty fees under OSFI's Late and Erroneous Filing Penalty Framework.

Special Requirements

The ICA requires filing the complete AAR with the Annual Return - OSFI will not accept a certificate containing only the opinion Insurers must complete and submit supplementary tables via RRS simultaneously with the AAR and FCT reports P&C and mortgage insurers must submit the UCLRE via RRS with the AAR

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Full BattleQuiz

@@ Line 1: / Line 1: @@
-'''Reading''': “Property and Casualty - Memorandum to the Appointed Actuary,” 2023.
+'''Reading''': "Memorandum to the Appointed Actuary," 2024. Author: OSFI (Office of the Superintendent of Financial Institutions Canada)
 '''Author''': OSFI (Office of the Superintendent of Financial Institutions Canada)
 [https://battleactsmain.ca/vanillaforum/categories/OSFI-MemoAA<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>]
+{| class='wikitable' style='background-color: navajowhite;
+|-
+|| '''BA Quick-Summary''': <span style="color: green;>'''Memorandum to the AA'''</span>
+* The memorandum outlines the '''required components of the Appointed Actuary’s Report (AAR) under IFRS 17''', including documentation of methods, assumptions, and judgment used in valuing insurance liabilities.
+* Actuaries must submit supplementary tables alongside the AAR, with strict filing deadlines to avoid penalties.
+* The memorandum provides guidance on the <u>transition from IFRS 4 to IFRS 17</u>, requiring actuaries to disclose the methods and assumptions used in the transition, including any changes in discount rates, risk adjustments, and contract boundaries.
+|}
 ==Pop Quiz==
 ==Study Tips==
+Use this wiki article as a reference but it's not a very interesting read! Ugh!
 Much of the content of this reading is discussed in other readings pertaining the appointed actuary. As such, this reading might be a good review. It is long and detailed and there doesn't seem to be much testable material that hasn't already been covered elsewhere. If you completely skipped this reading, I honestly don't know if it would matter. (Just my guess.)
+* It might be a good idea to do the quizzes.
+* Pay special attention to the '''multiple choice questions on section 6''' - there are 50 multiple choice questions spread over 4 Battle Cards within quiz #3.
 '''Estimated study time''': 2 hours ''(not including subsequent review time)''
 ==BattleTable==
 No past exam questions are available for this reading.
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-[https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=OSFI&suffix=MemoAA&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=all<span style="font-size: 20px; background-color: lightgreen; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''Full BattleQuiz]'''</span>
-&nbsp;&nbsp;[https://battleactsmain.ca/vanillaforum/categories/OSFI-MemoAA<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>]
 ==In Plain English!==
 ===Section 1 - OVERVIEW===
@@ Line 43: / Line 49: @@
 [https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=OSFI&suffix=MemoAA&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=1<span style="font-size: 20px; background-color: aqua; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''mini BattleQuiz 1]'''</span>
-===Section 2 - REGULATORY REQUIREMENTS===
+===Section 2 - GENERALLY ACCEPTED ACTUARIAL PRACTICE===
+<span style="color: green;">'''Both the ICA and Guideline E-15 require the work of the AA to be in accordance with accepted actuarial practice.'''</span> This fundamental requirement underpins all aspects of the appointed actuary's work. OSFI defines accepted actuarial practice as being embodied by Standards of Practice promulgated by the Actuarial Standards Board, supplemented by educational notes issued by the CIA.
-====2.1 Application of Professional Standards to the Appointed Actuary’s Valuation====
+It's crucial to understand that educational notes are not exhaustive descriptions of accepted actuarial practice. Therefore, an AA's practice doesn't necessarily fall outside accepted practice solely because it isn't described in an educational note. The 2024 memorandum explicitly states that it contains no requirements that override or limit accepted actuarial practice in Canada. When AAs deviate from accepted practice or the memorandum's requirements, they must clearly identify and provide justification for such deviations.
+===Section 3 - OSFI'S REVIEW PROCESS===
-This section emphasizes that the Appointed Actuary must ensure the <span style="color: green;">'''valuation of insurance contract liabilities complies with Canadian professional standards'''</span>. These standards are set by the Canadian Institute of Actuaries (CIA) and are crucial for ensuring credibility and reliability of the valuations. It underscores that the Appointed Actuary should be able to apply judgment and develop their own methodologies, but they should be consistent with the professional standards and should be defensible. The Actuary also needs to make sure that data used is accurate, relevant, and consistent over time. If there are any changes in data or methodology from the previous year, these need to be justified and clearly disclosed in the report.
+OSFI views the AAR as a critical input in assessing an insurer's financial resilience. The review process is thorough and may extend beyond initial filing. Upon reviewing the filed annual return and AAR, OSFI might decide to conduct further review and could request supplemental detail from the AA. The regulator reserves the right to reject assumptions or methods and request re-calculation using alternative approaches.
+The potential outcomes of OSFI's review are significant. Depending on findings, OSFI could require the AA to amend and re-file the AAR and annual return, reflect required changes in subsequent filings, or even require review from an independent actuary. <span style="color: green;">'''OSFI expects the AA to respond promptly to all requests related to the AAR and annual return.'''</span> This expectation of responsiveness underscores the collaborative nature of the regulatory review process.
-====2.2 Filing Directions for the AAR, Financial Condition Testing (FCT) Report and Peer Review Report====
+===Section 4 - REQUIRED CONTENTS OF THE AAR===
+The memorandum specifies comprehensive requirements for the AAR's contents, organized into major categories that ensure completeness and consistency across submissions.
-The section details the filing procedures and deadlines for the AAR, FCT Report, and Peer Review Report as mandated by OSFI. Reports should be electronically submitted through the Regulatory Reporting System (RRS), with specific deadlines for each. Non-compliance will result in penalties. For security and ease of access, reports should be in PDF format, searchable, and without security protection. Hard copies are required for some entities, but most should avoid this unless specifically contacted. Proper file naming is stressed, and the ICA requires entities to file their AAR along with their Annual Return.
+====4.1 Table of Contents====
+A well-structured table of contents serves dual purposes in the AAR. First, it provides users with an overview of the report's contents and organization, which is particularly valuable when extended to include major section headings. Second, it facilitates efficient navigation for users seeking specific information. The importance of a comprehensive table of contents cannot be overstated given the technical complexity and length of most AARs.
-====2.3 Filing Directions for the Supplementary Tables====
+====4.2 Identification of the AA and Peer Review Actuary====
+<span style="color: green;">'''The AA should disclose whether they are an employee of the insurer or a consultant.'''</span> This section must also identify:
-When submitting the AAR and FCT reports, organizations need to fill out and send the associated Excel sheets. These additional charts allow OSFI to easily gather and analyze specific data.
-====2.4 Persons Signing the Appointed Actuary's Report====
-<span style="color: green;">'''The AAR must be signed by the Appointed Actuary, who must be a Fellow of the CIA.'''</span>
-===Section 3 - OSFI’S REVIEW PROCESS===
-OSFI may conduct extended reviews of the AAR and, if assumptions or methods seem inappropriate, the Superintendent can require modifications and a re-filing of the AAR. The Appointed Actuary should promptly respond to any supplemental requests and always have supporting documentation available for OSFI's review, with the possibility of an independent actuary's report being requested.
-===Section 4 - SPECIAL LINE OF BUSINESS CONSIDERATIONS===
-'''Nothing testable'''. This section very briefly discusses marine insurance, title insurance, and business acquired before the transition date.
-===Section 5 - FORMAT OF THE APPOINTED ACTUARY'S REPORT===
-This is another short section with almost no testable information. It states that the AAR may vary somewhat from actuary to actuary but that most AARs include the given list of 22 sections. Obviously you don't have to memorize these. Some of the more obvious sections to include are:
+* The '''duration''' for which they have served as AA
+* '''Confirmation''' of compliance with continuing education requirements
+* The '''peer reviewer's''' identity and employer
+* The '''tenure''' of the peer reviewer with the insurer
-* Expression of Opinion
+This transparency helps establish the credibility and independence of the actuarial work performed.
-* Supplementary Information Supporting the Opinion
+====4.3 Materiality====
-* Materiality Standards
+The AA must describe the materiality standard applied in their work and explain how they determined that amount. A critical requirement is comparing the AA's materiality to the external audit materiality, ensuring alignment between actuarial and audit perspectives on what constitutes material differences.
-* Data
+====4.4 Expression of Opinion====
+The expression of opinion represents the core attestation of the AA's work. <span style="color: green;">'''The AA should use the format specified in the CIA Standards of Practice, practice-specific standards for insurers.'''</span> Any variation from this prescribed wording is considered a qualified opinion by OSFI.
+Key requirements for the opinion section include:
-Some of the sections specific to IFRS 17 are:
+* The AA's signature (which can be electronic)
+* The name of the AA (typed)
+* The date of signing
+* Alignment with opinions presented to shareholders and policyholders
-* Risk Adjustment for Non-financial Risk
+For branches where the external auditor report isn't available when the AA renders their opinion, a qualified opinion conditional upon receiving an unqualified external auditor opinion must be issued.
-* LIC (Liabilities for Incurred Claims)
-* LRC (Liabilities for Remaining Coverage)
-If you were asked to list items that must be included in the AAR, you could list these. They are pretty obvious.
 [https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=OSFI&suffix=MemoAA&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=2<span style="font-size: 20px; background-color: aqua; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''mini BattleQuiz 2]'''</span>
-===Section 6 - CONTENTS OF THE APPOINTED ACTUARY’S REPORT===
+====4.5 Changes That Influenced the Valuation====
-====6.1 Introduction====
+This critical section requires the AA to identify and describe various changes affecting the valuation. The scope is broad, encompassing changes in the external or internal environment, assumptions and methods, and other factors. Changes could involve:
-This section should identify the <u>scope</u> of the AAR and should <u>indicate clearly</u> that the AAR is an actuarial valuation report or supports an actuarial opinion. This section should also identify:
+* '''Policies and strategies'''
+* '''Operations and business model'''
+* '''Leadership and organizational structure'''
+* '''Lines of business'''
+* '''Underwriting and claims processes'''
-* the '''entity involved,
+Specific areas requiring discussion where applicable include significant transactions or changes in reinsurance arrangements, investment strategy (particularly where discount rates use own assets as reference), changes in accounting policies, and policies relating to dividends and par block management for life insurers.
-* the '''date''' of valuation,
-* the '''author's''' identity
-* the '''author's''' full contact information ''(address, email, phone)''
-* the '''author's''' authority for preparing the AAR
-I highlighted a word in each bullet point as a memory aid. When you do that, it becomes easier to remember because obviously you need the name of the '''entity''' and the '''date''' of the valuation. Then the last 3 bullet points are also obvious pieces of information you would want about the '''author'''.
+====4.6 Product====
+The AA must identify major product lines and describe their significant characteristics. The level of detail should reflect the complexity and uniqueness of products. For instance, a life insurer's AA might provide extensive details for segregated fund or universal life products while being more concise about standard renewable term insurance. Similarly, P&C insurers might focus more on emerging cyber coverages than traditional home and auto lines.
+====4.7 Reinsurance Held====
+=====4.7.1 Reinsurance Arrangements=====
+The AA must provide comprehensive descriptions of the insurer's reinsurance held, including:
-:{| class='wikitable'
+* '''Types''' of reinsurance
-|-
+* '''Products''' and key risks covered
-||This isn't specifically discussed in the source text but the the <u>author's authority</u> for preparing the AAR refers to the qualifications, credentials, or official capacity that enable the author (in this case, an actuary) to create the Appointed Actuary’s Report (AAR). This would typically include:
+* '''Amount''' of risk ceded and coverage limits
+* '''Accounting standard''' applicable
+* '''Back-to-back''' reinsurance contracts
-* '''Professional Qualifications''': The actuary's professional credentials, such as being a member of a recognized actuarial society or having specific actuarial certifications.
+Significant reinsurance arrangements require particular attention - these are arrangements where either significant risk is transferred or significant assets/liabilities are carried. The AA must also discuss arrangements that don't cede insurance risk, unregistered reinsurance, related party arrangements, and internal reinsurance within corporate groups.
-* '''Legal or Regulatory Authority''': Any legal or regulatory basis that empowers or requires the actuary to prepare the report. This could involve specific laws or regulations that designate the actuary's role in preparing such reports.
+=====4.7.2 Accounting for Reinsurance Held Assets and Liabilities under IFRS 17=====
-* '''Experience and Expertise''': The actuary's relevant experience in the field, which contributes to their capability to undertake this task.
+This section requires detailed description of reinsurance valuation, with particular focus on:
-* '''Appointment Details''': How and by whom the actuary was appointed to this role, possibly including references to the governing body or organization that authorized the appointment.
-This section is crucial as it establishes the credibility and legitimacy of the report by demonstrating that the author is qualified and authorized to prepare such a detailed and critical document.
+* Provisions for '''non-performance risk'''
+* '''Embedded guarantees''' in funds withheld arrangements
+* '''Aggregate treaties''' (stop loss, catastrophe, etc.)
+* Differences from direct contracts in '''discount rates''', '''risk adjustment''', and other valuation elements
-|}
+=====4.7.3 Other IFRSs=====
+For reinsurance not accounted for under IFRS 17, the AA must identify the arrangements and describe how associated assets and liabilities are determined, including identification of applicable accounting standards.
-====6.2 Expression of Opinion====
-Section 6.2 of the AAR document mandates that the Appointed Actuary '''must use a specific opinion format''' as per the CIA Standards of Practice. Any deviation will result in a qualified opinion by OSFI. The section requires the Actuary's original signature, name, date, and signing location. Opinions presented to shareholders and policyholders must align with those filed with OSFI, with any discrepancies and their reasons reported to OSFI. Qualifications or limitations in the valuation must be noted, but caveats or disclaimers should only appear in Section 6.3. If the External Auditor Report is unavailable, a conditional qualified opinion is required, with subsequent actions depending on the Auditor’s final opinion.
-====6.3 Supplementary Information Supporting the Opinion====
-Section 6.3 of the AAR requires '''detailed references''' to how the Appointed Actuary's figures are derived, including tables for consolidated results. It also mandates the inclusion of an exhibit reconciling non-consolidated AARs with the consolidated opinion, valuing non-federally regulated subsidiaries under Canadian actuarial practices.
-====6.4 Executive Summary====
-Section 6.4 of the AAR requires a '''summary of key results''' and findings, including a comparison of actual vs. expected prior year experiences, changes in methods or assumptions, significant issues, and deviations from CIA Standards or memorandum requirements.
-====6.5 Description of Entity====
-Section 6.5 of the AAR requires the Appointed Actuary to describe the '''entity's history, business lines, and management''', including recent changes and their impact on valuation. It mandates detailed information on the entity’s reinsurance arrangements, including types, terms, non-performance risks, and any material financial or related party reinsurance agreements, as well as retrospective reinsurance contracts and funds withheld.
-====6.6 Materiality Standards====
-In the entity's Annual Return preparation, both management and the external auditor agree on a materiality level, which must be reported in the AAR along with the Appointed Actuary's criteria for selecting their materiality standard in valuing liabilities.
-====6.7 Data====
-Section 6.7 of the AAR emphasizes the need for the Appointed Actuary to review, verify, and ensure the '''sufficiency, reliability, and accuracy of the data''' used for valuation, including data prepared by others, and to establish suitable check procedures as per CIA Standards of Practice.
-====6.8 Expenses====
-Section 6.8 of the AAR requires the Appointed Actuary to disclose the determination of directly attributable expenses, allocation of total entity expenses, treatment of acquisition costs, and investment expenses. It also mandates disclosure of recoverability tests for insurance acquisition cash flows as per IFRS 17.
-====6.9 Classification of Contracts====
-For the first year of IFRS 17 implementation in fiscal year 2023, Section 6.9 requires the Appointed Actuary to disclose any changes in contract classification from IFRS 4 to IFRS 17, including details of liabilities/assets and the rationale for reclassification, in a specified table format.
-====6.10 Portfolio Reporting====
-Section 6.10 mandates that the Appointed Actuary report on the determination of each portfolio at the legal entity level, disclose material changes from the prior year, and include details like the Actuarial Lines of Business and unique circumstances affecting contract boundaries.
-====6.11 Estimates of Future Cash Flows====
-Section 6.11 requires the AAR to '''report on future cash flow components''', including how they are generated, and details of claim expense cash flows with a clear indication of the approach used. It also mandates a description of methods used for internal loss expense provisions and the impact of any methodological changes, especially if material.
-====6.12 Discount Curve====
-The AAR must '''detail and justify the approaches''', inputs, assumptions, and methodologies used '''for developing the discount curve''', choosing discount rates, adjusting for financial risk, and reporting discount rates by year and liquidity category. Additionally, it should disclose contract groups under the Premium Allocation Approach where future cash flows aren't adjusted for time value of money and financial risk, based on specific conditions related to LIC and LRC.
-=====6.12.1 Bottom-Up Approach=====
-For the bottom-up approach in Section 6.12.1 of the AAR, the Appointed Actuary must '''detail the construction methods for the risk-free curve''', sources and periods for risk-free rates, and provide these rates by year. Additionally, descriptions of liquidity classes, allocation of actuarial lines of business to these classes, rationales for the number of classes, and techniques for deriving illiquidity premiums are required. The section also mandates details on the use and construction of replicating portfolios, including types of assets used and their rationale.
-=====6.12.2 Top-Down Approach=====
-In Section 6.12.2 on the top-down approach, the AAR requires detailed information about the reference portfolio, including whether the entity's assets or a hypothetical mix are used, the types of assets per liquidity category, and adjustments to the yield curve to eliminate non-relevant factors. The section also mandates explanations for the appropriateness of chosen assets and adjustments for liquidity characteristics differences.
-=====6.12.3 Reference Curves for Liquid and Illiquid Categories=====
-Section 6.12.3 mandates reporting on liquid and illiquid reference curves as defined by the CIA IFRS 17 Discount Curves – Fiera Capital. The Appointed Actuary must disclose if this data was used for deriving the illiquidity premium and explain any differences between the entity's discount curves and the reference curves, including a comparison of present values calculated using both sets of curves.
-====6.13 Risk Adjustment for Non-Financial Risk====
-Section 6.13 requires the Appointed Actuary to disclose the risk adjustment (RA) amount and technique used, both gross and net, including the confidence level, level of aggregation for non-financial risk, and methodology for setting the RA. It details specific requirements for the Cost of Capital, Quantile Techniques, and Margin approaches, including how diversification benefits are reflected, techniques for determining the confidence level, and justifications for changes from the previous year. For combining/hybrid approaches, disclosures from applicable methods should be included.
-====6.14 Liability for Incurred Claims====
-Section 6.14 of the OSFI P&C Memorandum to the Appointed Actuary, 2023, discusses the "Liability for Incurred Claims." This liability encompasses the fulfilment cash flows related to past services allocated to contract groups. The section is divided into sub-sections, each focusing on a different aspect
-=====6.14.1 Estimates of Future Cash Flows=====
-Outlines the need for detailed commentary on the estimates of future cash flows (gross, ceded, net), considering various factors like salvage, subrogation, trends in claims, coverage changes, reinsurance costs, reporting and payment lags, loss reserving practices, regulatory changes, and maintenance expenses.
-=====6.14.2 Discounting the Estimates of Future Cash Flows=====
-Discusses adjusting cash flow estimates to reflect the time value of money and financial risks.
-=====6.14.3 Risk Adjustment for Non-Financial Risk=====
-Requires explicit risk adjustment for liability for incurred claims (LIC), with disclosure of approach and amount.
-=====6.14.4 Comparison of Actual Experience with Expected Experience in Prior Year-End Valuations=====
-Involves comparing actual and expected experiences by accident year for each actuarial line of business, and requires commentary on material developments and any changes.
-====6.15 Liability for Remaining Coverage====
-Under the '''General Measurement Approach''' (GMA), the liability for remaining coverage comprises the fulfilment cash flows related to future service allocated to the groups of contracts at that date and the contractual service margin (CSM) of the groups of contracts at that date. The fulfilment cash flows include:
-* The best estimate of future cash flows
-* An adjustment to reflect the time value of money
-* A risk adjustment for non-financial risk
-Under the '''Premium Allocation Approach''' (PAA), the liability for remaining coverage, excluding the loss component at initial recognition and at the end of each subsequent reporting period, is measured by adjusting premiums received. This adjustment considers components such as:
-* Insurance acquisition cash flows
-* Investment component
-* Others as required per IFRS 17.55-59
-Premiums received are usually allocated on the basis of the passage of time over the coverage period. The '''Appointed Actuary''' should disclose when the basis of allocation differs from the passage of time during the coverage period for any portfolio.
-=====6.15.1 Measurement Approach=====
-The '''Appointed Actuary''' should disclose the portfolios and groups of contracts along with their associated measurement approach. Key points include:
-* For groups of contracts measured under the '''Premium Allocation Approach''' (PAA):
-** Provide detailed justification for:
-*** How the entity has satisfied the eligibility requirements, including a summary of calculations or tests performed, if applicable.
-*** The method chosen to recognize insurance acquisition cash flows.
-*** The process or procedure used to conclude on onerous groups of contracts.
-* For each portfolio:
-** Identify the groups of contracts, measurement approaches, and rationale for grouping in Tables 7.1 and 7.2 of the supplementary spreadsheet for (re-)insurance contracts issued and reinsurance contracts held.
-** Disclose any material changes in portfolios, groups of contracts, and associated measurement approaches from the previous year’s AAR.
-* Additionally, for each portfolio, the Appointed Actuary should disclose:
-** The considerations used to determine the groups of insurance contracts for recognizing insurance revenue.
-** The tests and/or considerations used to determine the groups of onerous contracts at initial recognition, those with no significant possibility of becoming onerous, and remaining contracts in the portfolio.
-=====6.15.2 Estimates of Future Cash Flows=====
-OSFI mandates the Appointed Actuary to provide detailed commentary on various aspects of '''future cash flows''' for GMA or onerous contract groups under the PAA including:
-* expected losses
-* non-acquisition expenses
-* servicing costs
-* commissions
-* premium adjustments
-* net outflows for onerous contracts.
-Additionally, any '''subsequent events''' impacting liability provisions must be disclosed and discussed.
-The commentary should also cover estimates for '''future reinsurance contracts''', detailing expected losses recoverable net of reinsurance costs.
-=====6.15.3 Discounting the Estimates of Future Cash Flows=====
-When applicable, the entity is required to adjust the estimates of future cash flows. This adjustment is to reflect two key aspects:
-* The '''time value of money'''
-* The '''financial risks''' related to those cash flows, provided these financial risks are not already included in the estimates of cash flows.
-=====6.15.4 Risk Adjustment for Non-Financial Risk=====
-This section addresses the risk adjustment for non-financial risk for portfolios or groups of contracts, differentiated by measurement approach:
-* '''Premium Allocation Approach''' (PAA):
-** An explicit risk adjustment calculation for the Liability for Remaining Coverage (LRC) is not necessary for groups of contracts that are not deemed onerous.
-** If groups of contracts become onerous, the Appointed Actuary must disclose the explicit risk adjustment in the calculation of the loss component for these groups.
-** In such cases, column (05) in Tables 4.1 and 4.2 of the supplementary spreadsheet must be filled.
-* '''General Measurement Approach''' (GMA):
-** An explicit risk adjustment calculation is mandatory.
-** The Appointed Actuary should disclose the approach and amount for LRC in columns (03) and (04) of Tables 4.1 and 4.2 in the supplementary spreadsheet.
-=====6.15.5 Contractual Service Margin=====
-This section focuses on the approaches related to the Contractual Service Margin (CSM):
-* The '''Appointed Actuary''' should discuss:
-** The approach used to determine the discount rate locked in at initial recognition for the measurement of CSM.
-** The approach used to determine the interest to accrete on the CSM.
-* Further discussions by the Appointed Actuary should include:
-** The number of groups in each portfolio as stated in Tables 7.1 and 7.2.
-** Considerations used to determine the number of groups (e.g., segmenting levels of profitability).
-** Methods for assessing contracts' profitability to assign them to appropriate groups, along with justifications for other criteria used.
-** General considerations for determining coverage units and selecting the discount rate.
-** If a discount rate is not used, the rationale behind this decision.
-=====6.15.6 Loss Component=====
-This section outlines the responsibilities of the '''Appointed Actuary''' concerning the loss component:
-* The Appointed Actuary is expected to explain the key drivers for:
-** The loss component for each group of onerous contracts at initial recognition.
-** The loss component for each group of contracts where a loss component arises at subsequent measurement.
-** Under the General Measurement Approach (GMA), discuss subsequent changes to the loss component for each group of onerous contracts.
-* For reinsurance contracts covering only a part of the group of underlying onerous contracts:
-** Disclose the systematic and rational allocation method used to determine the portion of losses of the group of onerous contracts that is reinsured.
-** Describe how the loss-recovery component is established.
-* The approach used to allocate changes in the fulfillment cash flows of the Liability for Remaining Coverage as specified in paragraph 50(a) of IFRS 17 should be described.
-* For insurance contracts measured under the Premium Allocation Approach (PAA):
-** Provide commentary on the facts and circumstances associated with any groups of insurance contracts for which a loss component arises at subsequent measurement.
-** Include the amount of the loss components on both a group and portfolio basis.
-====6.16 Other Liabilities/Other Assets====
-Section 6.16 covers the Appointed Actuary's duty to evaluate Self-Insurance Retention plans, report them net of reinsurance, and detail any other liabilities or assets not previously mentioned, including valuation methods.
-====6.17 Liability Roll Forward====
-Section 6.17, "Liability Roll Forward," requires the Appointed Actuary (AA) to provide liability roll forward schedules for different portfolios. These are to be shown in Tables 8.1 and 8.2 of a supplementary spreadsheet, with a separate section for issued (re-)insurance contracts and held reinsurance contracts, all based on the legal entity level.
-====6.18 Liabilities for Investment and Service Contracts====
-Section 6.18, titled "Liabilities for Investment and Service Contracts," instructs the Appointed Actuary to fill out Table 9 in the supplementary spreadsheet. This table is specifically for liabilities associated with investment and service contracts, if applicable.
-====6.19 Transition Amount====
-Section 6.19, "Transition Amount," focuses on contracts measured under modified retrospective, full retrospective approach, or fair value on transition to IFRS 17. It requires details on how the entity measures these contracts at the date of transition and how the Contractual Service Margin (CSM) is determined. For Title insurance business, if applicable, it asks for details on the approach used to determine the transition amount of title insurance contracts at the date of transition.
 [https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=OSFI&suffix=MemoAA&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=3<span style="font-size: 20px; background-color: aqua; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''mini BattleQuiz 3]'''</span>
-===Section 7 - OTHER DISCLOSURE REQUIREMENTS===
+====4.8 Data====
-====7.1 New Appointment====
+The data section must describe the information used for valuation and notable year-over-year changes. Requirements vary by insurer type but share common themes of transparency and control. For P&C insurers, details must cover treatment of salvage and subrogation, loss adjustment expenses, and reinsurance in claims data. Life insurers must describe the basis for disability payment reductions related to government pension plans. Mortgage insurers need to detail cure and recovery treatment, loss adjustment expenses, and macroeconomic variables.
+<span style="color: green;">'''The AA should describe the controls used to provide assurance over the adequacy of the data used in the valuation.'''</span> This includes describing the extent to which the AA considers the external auditor's work and any instances where they don't rely on it.
-OSFI mandates that Appointed Actuaries adhere to the standards outlined in Guideline E-15. This includes being transparent about any deviations from the qualification requirements and outlining plans to fulfill these requirements. Additionally, if the Actuary was appointed in the last year, the Annual Actuarial Report (AAR) must detail:
+====4.9 Actual and Expected Experience====
+This section requires comparisons of actual to expected experience for significant assumptions used in measuring actuarial and policy liabilities. OSFI expects these comparisons to cover sufficient periods - ideally ten years for P&C and mortgage insurers and five years for life insurers. If data for these periods isn't available, the AA must explain the rationale for shorter periods and work toward meeting expectations.
-* the date of their appointment
+=====4.9.1 Life Insurers=====
-* the previous Actuary's resignation date
+Life insurers must discuss actual versus expected experience for significant assumptions like mortality and policyholder behaviour, providing sufficient detail to demonstrate the reasonableness of current assumptions.
-* when OSFI was informed about the appointment
+=====4.9.2 P&C and Mortgage Insurers=====
-* confirmation of communication with the former Actuary as per ICA section 364(1)
+For P&C and mortgage insurers, comparison involves analyzing ultimate undiscounted loss estimates at current year-end versus prior year-ends. Analysis must be conducted by accident year and line of business. Key discussion points include:
-* a comprehensive list of the new Actuary's qualifications, considering the Canadian Institute of Actuaries (CIA)’s Rules of Professional Conduct
-====7.2 Annual Required Reporting to the Board or Audit Committee====
-This is a very short section in the source text:
-* For Canadian entities:
-** The AAR must disclose the <u>date</u> the Appointed Actuary met with the board or the audit committee, as mandated by paragraph 203(3)(f) of the ICA.
-* For foreign entities:
-** The AAR must disclose the <u>date</u> the Appointed Actuary met with the chief agent, as required by section 630 of the ICA.
-====7.3 Continuing Professional Development Requirements====
-Directly from the source text:
-* ''The Appointed Actuary must disclose in the AAR that he/she is <u>in compliance</u> with the Continuing Professional Development requirements of the CIA.''
-====7.4 Disclosure of Compensation====
-Alice and Andy:
-: '''''Alice the Actuary''', known for her meticulous calculations within the walls of her insurance company, always made sure her <span style="color: green;">'''compensation'''</span>, from <span style="color: blue;">'''salary to bonuses'''</span>, was an open book, aligning with the Financial Stability Board's principles. Her documentation was a beacon of transparency, detailing every bit of her earnings and the <span style="color: blue;">'''methods'''</span> behind them, ensuring her judgment remained as clear as the summer sky!''
-: ''Meanwhile, '''Caleb the Consultant''', a consultant with a knack for navigating complex projects, meticulously outlined his <span style="color: purple;">'''consulting fees'''</span>, the rationale behind them, and their proportion to his firm's revenue in a detailed report.''
-: ''Each year, they '''both''' sent their compensation disclosures to <span style="color: red;">'''OSFI'''</span> in a separate cover letter, a ritual that not only fulfilled regulatory requirements but also symbolized their commitment to impartiality and confidentiality. Together, Alice and Caleb exemplified the essence of integrity and transparency in the actuarial profession, setting a standard for actuaries from the Atlantic to the Pacific!''
-The following 5 items related to compensation must be disclosed as described below.
-: {| class='wikitable'
-|-
-|| Compensation - Total $
-|}
-:* Appointed Actuaries must <span style="color: green;">'''disclose compensation'''</span> in line with Financial Stability Board's Principles and OSFI requirements, ensuring unbiased judgment.
-: {| class='wikitable'
-|-
-|| Compensation Methodology
-|}
-:* Disclosure includes <span style="color: blue;">'''methodology for deriving'''</span> direct and indirect compensation, promoting transparency and impartiality.
-: {| class='wikitable'
-|-
-|| Compensation Details - Internal Actuary
-|}
-:* Employee actuaries' compensation details, such as <span style="color: blue;">'''salary and bonuses'''</span>, must be openly documented, including variable compensation calculation methods.
-: {| class='wikitable'
-|-
-|| Compensation Details - Consulting Actuary
-|}
-:* External consultant actuaries are required to detail <span style="color: purple;">'''consulting fees'''</span>, determination basis, and fees' revenue proportion, ensuring full disclosure.
-: {| class='wikitable'
+* Reasons for significant differences between estimates
-|-
+* Changes in methods or assumptions to minimize future development
-|| Compensation - OSFI
+* Material differences between loss development in returns versus AAR comparisons
-|}
+* Quantification of differences in various exhibits
-:* Compensation disclosures are <span style="color: red;">'''sent to OSFI'''</span> in a separate cover letter, ensuring confidentiality and compliance with regulatory requests.
-====7.5 Reporting Relationships of the Appointed Actuary====
+====4.10 Methodology====
+The methodology section requires comprehensive disclosure of approaches used in the valuation. Key requirements include:
-The Appointed Actuary's Report (AAR) provides essential disclosures about the actuary's <u>reporting relationships</u> and dependencies. These disclosures vary depending on whether the actuary is an internal employee or an external consultant.
+* Identification of '''major accounting choices''' deviating from industry norms
+* Description of '''major estimation methods''' (development, expected, Bornhuetter-Ferguson for P&C; seriatim projections for life)
+* Discussion of '''probability-weighted cash flow''' determination methods
+* Description of '''discount rate construction''' and application
+* Explanation of '''risk adjustment determination''' and confidence levels
+* Details on '''insurer discretion''' in products like participating policies
-:{| class='wikitable'
+For life insurers, additional requirements cover dividend determination, smooth mechanisms, valuation fund mapping for segregated funds, and bulk reserve determination.
-|-
-|| Internal Appointed Actuaries
-|}
-:* Must disclose the '''name and position''' of their direct supervisor(s), including both '''solid and dotted line''' reporting relationships.
+====4.11 Assumptions====
-:* Should report any '''changes in reporting relationships''' that occurred within the past year.
+<span style="color: green;">'''The AAR should contain a description of key assumptions and how they are derived.'''</span> This includes discussing the use of insurer data versus industry data, the review cycle for assumptions, and significant year-over-year changes with supporting rationale. The level of detail should reflect the materiality and complexity of each assumption.
-:* Need to disclose any '''expected changes''' in reporting relationships.
+====4.12 Reliance on the Work of Others====
+AAs frequently rely on others' work in conducting valuations. Common areas include:
-:{| class='wikitable'
+* External auditor for '''data validation'''
-|-
+* Other AAs for '''pool valuations''' (e.g., Facility Association)
-|| External Appointed Actuaries
+* External auditor for '''IFRS 17 accounting choices'''
-|}
+* Other employees for '''non-actuarial assumptions''' (e.g., discount rates)
-:* Should disclose the '''names and positions''' of their main contacts within the entity, specifically regarding roles and functions like '''valuation, Financial Condition Testing (FCT), and Minimum Capital Test (MCT) support'''.
+The AA must identify and describe significant reliances, expressly indicate acceptance of work performed by others, and note any reservations associated with that reliance.
-:* Must include the '''name and position''' of the individual who hired them.
+====4.13 Table of Exhibits and Appendices====
-:* Need to disclose the '''entity employees''' with whom they discuss their findings and reports.
+Similar to the main table of contents, this table presents the organization and location of quantitative analyses comprising the valuation, providing crucial navigation assistance for technical users.
-====7.6 Peer Review of the Work of the Appointed Actuary====
-The topic of peer reviews of the appointed actuary's work is covered in detail in other readings. This reading doesn't provide much detail but simply refers OSFI's guideline E-15. This short section does however contain 1 comment in bold font ''(presumably because it's important'') but it's pretty obvious:
-* ''For each peer review report, the Appointed Actuary should <u>summarize each key finding</u> or recommendation, and the status of each finding / recommendation by year.''
-====7.7 Re-submitting the report====
-If the AA report is resubmitted, the AAR must disclose the reason(s) for resubmission.
 [https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=OSFI&suffix=MemoAA&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=4<span style="font-size: 20px; background-color: aqua; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''mini BattleQuiz 4]'''</span>
-===Section 8 - UNPAID CLAIMS AND LOSS RATIO ANALYSIS EXHIBIT===
+===Section 5 - ACTUARIAL CALCULATIONS SUPPORTING REGULATORY CAPITAL TESTS===
+For P&C and mortgage insurers, the memorandum requires specific support for regulatory capital calculations. The AA must provide information used to calculate and complete returns for the minimum capital test (MCT), branch adequacy of assets test (BAAT), or mortgage insurer capital adequacy test (MICAT). <span style="color: green;">'''The AA should describe the information provided and details on how those amounts were determined.'''</span>
+Appendices II and III of the memorandum provide detailed lists of required data elements, including various liability and asset measures, duration calculations, and risk adjustments by class of insurance.
+===Appendix I - FILING DIRECTIONS===
+The memorandum provides specific filing requirements and timelines that must be strictly followed:
+====Filing Timelines====
-====8.1 Introduction====
+* '''AAR and supplementary tables''': within 60 days of fiscal year-end
+* '''FCT report''': earlier of 30 days after board presentation or one year after fiscal year-end
+* '''Pre-release peer reviews''': follow same timelines as material reviewed
+* '''Post-release AAR peer reviews''': within 30 days of AAR release
+* '''Post-release FCT peer reviews''': by December 31
-The '''purpose''' of the Unpaid Claims and Loss Ratio Analysis Exhibit (UCLR Analysis Exhibit), as shown in Appendix II, is to allow the presentation of industry loss information in a standard format.
+====Filing Procedures====
+All reports must be filed electronically via the Regulatory Reporting System (RRS). Key requirements include:
-The format facilitates the '''analysis''' of:
+* Include signed expression of opinion in submission
+* Convert to PDF format (not scanned)
+* No security protection on files
+* Follow specified file naming conventions
+* No email submissions for security reasons
-* the impact of <u>discounting</u> on estimates of future cash flows
+<span style="color: red;">'''Failure to meet filing deadlines could result in penalty fees'''</span> under OSFI's Late and Erroneous Filing Penalty Framework.
-* <u>loss trends</u>
+====Special Requirements====
-Each class of business is shown separately.
+The ICA requires filing the complete AAR with the Annual Return - OSFI will not accept a certificate containing only the opinion
+Insurers must complete and submit supplementary tables via RRS simultaneously with the AAR and FCT reports
-====8.2 Data====
+P&C and mortgage insurers must submit the UCLRE via RRS with the AAR
-This section seems way too detailed for an exam question. It discusses things like whether the data is presented by accident year or underwriting year. I don't think there are any likely exam questions based on this section.
-===Section 9 - Appendix I - Expression of Opinion===
-I've copied the entirety of section 9 from the reading below. See below the expression for hints on how to study this.
-{| class='wikitable'
-|-
-|| [[File: OSFI.MemoAA_(010)_Opinion.png]]
-|}
-The U.S. version of Exam 6 often asks the candidate to reproduce the language of the opinion as given above, and they are '''very strict about the wording'''. This has never been asked on published exams for Exam 6-Canada, but it seems a reasonable question. To memorize it, it helps to break it down into specific sentences as follows:
-: '''Sentence 1''': To the policyholders [and shareholders] of [the ABC Insurance Company]:
-:* ''This is a very very obvious introductory sentence.''
-: '''Sentence 2''': I have <u>valued</u> the policy liabilities of [the Company] for its [consolidated] financial statements prepared <u>in accordance</u> with International Financial Reporting Standards <u>for the year</u> ended [31 December xxxx].
-:* ''There are 3 key items in this sentence as indicated by the underlined words.
-: '''Sentence 3''': In my opinion, the amount of policy liabilities is appropriate for this purpose.
-:* ''This sentence will vary based on whether the amount of policy liabilities shown in the financial statements is indeed appropriate.''
-:* ''If the policy liabilities are <u>too low</u> in the appointed actuary's opinion then "appropriate" should be replaced with "deficient / inadequate".
-:* ''If the policy liabilities are <u>too HIGH</u> in the appointed actuary's opinion then "appropriate" should be replaced with "redundant / excessive".
-: '''Sentence 4''': The valuation conforms to <u>accepted actuarial practice</u> in Canada and the [consolidated] financial statements <u>fairly present</u> the results of the valuation.
-:* The 2 key ideas in this sentence are underlined.
-: '''Fill-in-the-blanks''': The name and signature of the appointed actuary are obvious. But don't forget that the <u>date</u> and <u>location</u> are also required.
-===Section 10 - Appendix II - Unpaid Claims and Loss Ratio Analysis Exhibit===
-The source text shows PDF versions of blank Excel templates for the Unpaid Claims and Loss Ratio Analysis Exhibit. There are no examples and no real discussion of how this exhibit fits with the appointed actuary's expression of opinion. For that reason, an exam question related to this exhibit seems unlikely. In any case, a summary of the information contained in this exhibit is:
-* Paid Losses
-* LIC (Liability for Incurred Claims) including FCFs (Fulfillment Cash Flows)
-* AIC (Assets for Incurred Claims) including FCFs (Fulfillment Cash Flows)
-* Loss Ratio
-* Claim Counts
-It is organized by '''AY''' and by '''Line of Business'''.
-If I were studying again for this exam, that's all I would learn. If there was then an exam question on this topic, I would take an educated guess.
-===Section 11 - Appendix III – Annual Return Lines of Business===
-This section is just a list of lines of business like Personal Property, Automobile-Liability - Private Passenger, Mortgage, etc. You would not have to memorize anything from here. It appears to be information only, to indicate the line of business categories to used in completing the Unpaid Claims and Loss Ratio Analysis Exhibit.
-===Section 12 - Appendix IV - Unpaid Claims and Loss Ratio Analysis Exhibit===
-Section 12 is detailed instructions on the various rows and columns in the Unpaid Claims and Loss Ratio Analysis Exhibit. If you had to complete this exhibit as part of your work duties, this would be a useful section but I don't think there are any likely exam questions.
-===Section 13 - Appendix V – Definitions===
-This section looks like a throwaway section. There are only 4 definitions provided but one of them is interesting as it pertains to IFRS 17. The '''old formula for Loss Ratio''' is:
-* Loss Ratio &nbsp; = &nbsp; claims / <span style="color: red;">'''EP'''</span>
-But this is only valid 2022 and prior. '''After 2022''' we use the equivalent IFRS 17 concept of <u>insurance revenue</u>:
-* Loss Ratio &nbsp; = &nbsp; claims / <span style="color: green;">'''insurance revenue'''</span>
 [https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=OSFI&suffix=MemoAA&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=5<span style="font-size: 20px; background-color: aqua; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''mini BattleQuiz 5]'''</span>
 [https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=OSFI&suffix=MemoAA&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=all<span style="font-size: 20px; background-color: lightgreen; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''Full BattleQuiz]'''</span>
-&nbsp;&nbsp;[https://battleactsmain.ca/vanillaforum/categories/OSFI-MemoAA<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>]
 ==POP QUIZ ANSWERS==