Flashcards in Chapter 8- Professional Guidance Deck (9)
Describe the difference between standards of actuarial practice (SAPs) and advisory practice notes (3) ?
• Standards of Actuarial Practice (SAPs) must be adhered to by all members:
o Material breach constitutes grounds for complaint under the disciplinary procedures and strong prima facie evidence of unprofessional conduct
o Any departure from a strict interpretation of SAP must be disclosed and justified in the member’s report
• Advisory Practice Notes (APNs) provide advice to guide members in their relevant area of practice
o Failure to comply does not in itself constitute grounds for complaint under disciplinary procedures but extent of non-compliance will be considered by committees investigating alleged unprofessional conduct
o Recommended to disclose any departure in the report
List the various guidance notes applicable to the life insurance industry?
- SAP104 – valuation of assets, liabilities and solvency capital requirements for LT insurers
- APN105 – Minimum requirements for deriving AIDS extra mortality rates
- APN106 – actuaries & LTI in SA
- APN107 – EV Reporting
- APN108 – transfers of LT business and role of independent actuary
- APN109 – LTI takeovers
- APN110 – Allowance for embedded investment derivative
- APN111-head of actuarial function for insurance groups
Outline the contents of SAP 104 (3)?
The guidance note is a combination of mandatory and advisory guidance
Describes the methods and bases adopted for IFRS (international financial reporting standards) Reporting (until IFRS 17 is adopted)
Separate sections cover: (these are mandatory)
• Section 2.1-2.5: Financial soundness valuation (forms the basis for IFRS 4 reporting)
• Section 3.2-3.3: Published Reporting
• Section 4: Prudential supervisory reporting
• Section 5: Tax liability
Outline the contents of APN 105 (4)?
This guidance note is regarded as advisory and specifies and approach for determining projected extra AIDS mortality of lives assured.
As part of APN a spread sheet model is provided which meets the minimum requirements for AIDs loadings.
The models structure makes them increasing difficult to calibrate to produce any reasonable results.
The ASSA demography and epidemiology committee advise that the results of the models be used with care and that model be calibrated with appropriate data.
Outline the contents of APN 106 (1)?
This advisory note is regarded as best practice. It provides guidance for the head of actuarial functions to meet governance standards in the Insurance Act 2017?
Outline the contents of APN 7 (4)?
• Best practice
• Principles to determine and present the
o embedded value (EV),
o AoEV and
o value of new business (VNB) results
• Sets out EV framework wrt analysis and disclosure
• Encourages consistent approach
o between companies and
o with European Embedded Value (EEV) principles
Outline the contents of APN 108 (4)?
• Best practice
• Sets out
o Issues to be addressed
o Actuary’s independence
o Extent of actuary’s involvement
• Point out possible pitfalls
• Deals with report to be written by actuary
Outline the contents of APN 110 (2)?
• Best practice
• Recommends use of [market-consistent stochastic models]
o to quantify reserves for embedded investment derivatives