The P&C Actuary's Role in Solvency Monitoring - Property and ...

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PACICC – The P&C Actuary’s Role in Solvency Monitoring Page i TABLE OF CONTENTS Part 1 – Purpose and Scope ......................................................................................................... 1 Part 2 – Research Methodology Process .................................................................................... 2 Part 3 – Financial Metrics – Federal and Provincial P&C Insurance Companies ....................... 3 Part 4 – Introduction to the Regulation of Insurance Companies in Canada ............................... 4 Part 5 – Current Canadian Regulatory Requirements of the Actuary – Federal Regulation ....... 9 Part 6 – Current Canadian Regulatory Requirements of the Actuary – Provincial Regulation ... 20 Part 7 – The Canadian Institute of Actuaries ............................................................................... 26 Part 8 – History of P&C Insurer Insolvency in Canada .............................................................. 42 Appendices A – Reference Sources ................................................................................................................ 44 B – CIA Guiding Principles ........................................................................................................ 47 C – OSFI 2010 Memorandum for the Appointed Actuary’s Report on Property and Casualty Insurance Business ...................................................................................................................... 48
PACICC – The P&C Actuary’s Role in Solvency Monitoring Page 1 PART 1 – PURPOSE AND SCOPE Purpose The Property and Casualty Insurance Compensation Corporation (PACICC) is interested in determining if there is a relationship between the financial solidity of property and casualty (P&C) insurers who use the services of actuaries and those that do not. The role of the actuary with Canadian P&C insurance companies is greatly influenced by the requirements set out in legislative acts and regulations as well as by the professional requirements established by the Canadian Institute of Actuaries (CIA or Institute). PACICC requested KPMG LLP (KPMG) to prepare a research report addressing the following: ― Summary of current Canadian regulatory requirements 1 of the actuary directed at solvency ― History of changes over the past 20 to 25 years in actuarial requirements as mandated by the CIA ― Effect of changes in actuarial requirements, either emanating from regulatory requirements or the CIA, on the solvency of Canadian insurers Organization of Report We organize this report in the following eight parts: 1. Purpose and scope 2. Research methodology process 3. Financial metrics – federal and provincial P&C insurance companies 4. Introduction to the regulation of insurance companies in Canada 5. Current Canadian regulatory requirements of the actuary – federal regulation 6. Current Canadian regulatory requirements of the actuary – provincial regulation 7. The Canadian Institute of Actuaries 8. History of P&C insurer insolvency in Canada Limitation of Scope It is important to recognize that PACICC’s request of KPMG has a very narrow focus. Our objective is to review the role of the P&C actuary as defined by regulatory and professional requirements and to seek potential links between the effect of changes in actuarial requirements and the solvency of Canadian P&C insurers. 1 Throughout this report, the terms “regulatory requirements” and “regulation” are typically used in a broad sense to refer to both legislative acts as well as requirements set out by superintendents of insurance in directives, guidelines, bulletins, memorandum, and other forms of guidance.
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