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Preparatory work and issues for Compliance Reviews

A list of some of the preparatory work necessary and issues requiring consideration prior to peer review is given below. This is intended to be at a high-level and is by no means an exhaustive list.

General

  1. Building libraries of policy information, including marketing and policyholder literature and embedding systems to ensure that information provided to policyholders is actuarially reviewed first.
  2. Building libraries of regulatory correspondence and recent actuarial issues.
  3. Methods of designing and setting up calculation and other audit trails.
  4. Avoiding conflicts of interest.

Operational Management

  1. Data systems documentation.
  2. Documenting data integrity monitoring systems.
  3. Documenting disaster recovery procedures.
  4. Treating customers fairly and discretionary elements of pricing.
  5. Documenting unit pricing methodologies, control and monitoring systems, and procedures for dealing with pricing errors.
  6. Demarcating responsibilities and setting up reporting lines inside and outside the actuarial departments. Interaction of these responsibilities with the "Controlled Functions" within the company and documentation needed.
  7. Systems for controlling operational risk.

Actuarial and Financial Management

  1. Appointment letters for appointed actuaries - what needs to be covered?
  2. Skills and experience requirements of staff for resourcing the valuation department.
  3. Documenting valuation systems and controls.
  4. Documenting methods and calculations for the derivation of valuation expense assumptions from company expense analyses and forecasts and estimating costs of closure to new business.
  5. Documenting data validation systems.
  6. Monitoring mortality, morbidity and persistency experiences.
  7. Assessing adequacy and appropriateness of underwriting and reinsurance arrangements, monitoring and documentation.
  8. Treatment and allowance for financial options when setting valuation interest rates and calculating resilience reserves and reserves for adverse deviations.
  9. Documenting and managing policyholders' reasonable expectations.
  10. Documenting asset share and bonus methodologies.
  11. Methodologies used for pricing and reserving for guarantees and options.
  12. Producing and reporting to the board on the Company's Financial Condition and on the results and implications of other actuarial investigations.
  13. Calculation methodologies and systems for calculating and monitoring surrender and PUP values, application of MVAs.

Other Financial Management

  1. Ownership of the estate in with profit funds.
  2. Monitoring and controlling expenses.
  3. Impact of the company's taxation bases on product pricing and reserving.

Investment Policy

  1. Setting and documenting investment policies for funds.
  2. Asset liability matching at company and individual fund levels.
  3. Monitoring systems to ensure that investment managers follow the investment policy.
  4. Monitoring and analysing investment policy.
  5. Setting policy and monitoring systems regarding the use of derivatives including limits on counterparty exposure.

Writing New Business

  1. Setting financial requirements for new business and systems to ensure that premium rates on new business are supportable, including setting limits on new business volumes.
  2. Monitoring new business profitability.
  3. Documenting methodologies and forecasts of new business volumes.
  4. Documenting disclosure calculations and producing with profit guides.