Answers to the European Commission on the ... - Eiopa - Europa

Staff that fully understands <strong>the</strong> risk covered in <strong>the</strong> policies
8.127 The insurer must ensure that <strong>the</strong> staff assessing and valuating <strong>the</strong>
technical provisions adequately understands <strong>the</strong> risks covered by and
associated with each contract.
8.128 Proper internal control procedures should be developed regarding <strong>the</strong>
staff dealing with technical provisions, through an appropriate
segregation of duties, namely regarding <strong>the</strong> reporting, assessment and
processing of claims.
Actuarial function regarding technical provisions
8.129 The actuarial function plays an essential role in <strong>the</strong> proper assessment
of <strong>the</strong> technical provisions.
8.130 Insurance undertakings are required <strong>to</strong> ensure that <strong>the</strong>y take
competent and appropriate actuarial advice in<strong>to</strong> account when making
<strong>the</strong>ir decisions on provisioning. CEIOPS is aware that <strong>the</strong> actuarial
function will likely include also o<strong>the</strong>r areas like capital adequacy or
business strategy.. Competent means from a person with <strong>the</strong> expertise,
experience, and personal skills commensurate with <strong>the</strong> complexity and
risk of <strong>the</strong> undertaking's business (see Annex A <strong>to</strong> CfA 16 on Fit and
Proper). The advice should be appropriately independent of <strong>the</strong> Board.
8.131 External audi<strong>to</strong>rs should have an independent oversight from <strong>the</strong> Board
of Direc<strong>to</strong>rs and should have <strong>the</strong>ir own actuarial function or have
access <strong>to</strong> actuarial advice independent of <strong>the</strong> actuarial function advising
<strong>the</strong> Board of Direc<strong>to</strong>rs. This is in order <strong>to</strong> allow assessing internal
actuarial analysis.
8.132 Supervisory authorities assess whe<strong>the</strong>r <strong>the</strong> insurance undertaking's
actuarial function has sufficient expertise, experience, and personal
skills for <strong>the</strong> supervisor <strong>to</strong> rely on its assessment. They check that this
function is appropriately segregated and not subject <strong>to</strong> any nontechnical
influence by <strong>the</strong> Board of Direc<strong>to</strong>rs and/or Senior
Management. 57
8.133 The objectives of <strong>the</strong> actuarial function within insurance undertakings
should be harmonized. 58 .
Reinsurance arrangements
8.134 Suitable systems should be in place <strong>to</strong> ensure that reinsurance
recoveries are identified and appropriately recorded on a timely basis.
8.135 There should be guidelines for assessing credit risk in technical
provisions for amounts recoverable (including amounts contingently
recoverable) under reinsurance arrangements. (This also relates <strong>to</strong> CfA
12). The risk that <strong>the</strong> insurer will not be able <strong>to</strong> pay <strong>the</strong> claims as <strong>the</strong>y
fall due because of insufficient reinsurance is an insurance related risk,
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