Accreditation Program Manual SEG/IAR Form

Transcription

1 TE: Tracked changes to the self-evaluation guide/interim annual review are to ensure consistency with the changes proposed to the Review Team Guidelines. a) Sufficient Qualified Staff and Resources PART B1: FINANCIAL ANALYSIS The department should have the appropriate staff and resources to effectively and timely review the financial condition of all domestic insurers. 1. Does the department have analysts on staff or under contract whose primary responsibility is to review the financial statements as well as other information and data to discern potential and actual financial problems of all domestic insurers? 2. Indicate the number below for each of the following: Financial analysts: this should include the total number of analysts employed or contracted by the state who are performing or have performed financial analyses. If applicable, also provide the number of vacant positions. Supervisors: this should include the total number of supervisors employed or contracted by the state who are performing or have performed financial analysis. If applicable, also provide the number of vacant positions. Multi-state companies: this should include all forms of traditional insurers (L&H, P&C, HMO, title, fraternal, non-captive RRGs, etc.) that meet the definition of a multi-state insurer as defined in the Part B Preamble. Only provide the total number of multi-state companies the financial analysis staff is responsible for monitoring. RRGs organized as captives: this should include all RRGs that are organized under the state s captive statutes. Only provide the total number of RRGs organized as captives the financial analysis staff is responsible for monitoring. Single state companies: this should include all forms of traditional insurers (L&H, P&C, HMO, title, fraternal, etc.) that are domiciled and operating in one state. Only provide the total number of single state companies the financial analysis staff is responsible for monitoring. Other: this should include any other domestic insurers that are not subject to accreditation, not listed in the singlestate column and are the responsibility of the financial analysis staff. Additionally, please provide a brief note discussing the company type. Total domestic companies: this should include a total of all the insurers the financial analysis staff is responsible for monitoring. The total should equal the sum of each of the columns. Current Year (CY) CY 1 CY 2 Financial Analysts Supervisors Multi- State RRGs as Captives Single State Other Total Domestic

2 Notes: In the event the department has financial analysis staff that act as both an analyst and a supervisor, include them in both counts and provide a note that discusses the circumstance. Surplus lines companies and reinsurers licensed in one state but operating in more than one state are considered multi-state companies. When counting the total number of insurers for the current year, the department should provide the current count at the time this document is being prepared. The total number of multi-state domestic companies, including RRGs licensed as captives, for the current year should tie to the total number of companies included in the attachment for #5 below. In the event the total counts do not match, please provide information as to why (i.e., a company redomesticated, two companies merged, a new company, etc.). Throughout the SEG IAR document, there will be reference to domestic insurers. Domestic insurers are to include all domestic multi-state insurers, including any RRGs licensed as captives, unless explicitly stated otherwise.

3 Financial Analysis continued Accreditation Program Manual 3. As a separate attachment, provide a current list of staff members who completed financial analysis work on behalf of the department, and include the following information on each: Name, Professional designation(s), if any, Title, Years employed by the department (include functional area), Type of college degree, including major area of concentration, Prior regulatory or insurance experience, Indicate whether the individual is responsible for supervisory reviews of multi-state financial analyses, including any RRGs licensed as captives, Indicate whether the individual is a department employee (full/part time) or a contractual employee. 4. If the department utilized contractual analysts, during the past twelve months, please describe in a separate attachment the manner and extent of utilization in the department s analysis activities. If there are individual contractors dedicated to completing financial analysis on behalf of the department, include the information outlined in #3 above for each individual. 5. As a separate attachment, provide a list of all domestic multi-state insurers, including RRGs licensed as captives. The listing should include the following: Company name, Type of insurer (L&H, P&C, etc.), Group code (full review only), Total assets (full review only), Total capital and surplus (full review only), Total direct written premiums (full review only), The number of states in which the company is licensed and/or operates, The analyst assigned to the company, The analyst s supervisor, The date the preliminary analysis was completed for the annual statement (if applicable), The date that initial analysis was completed for the annual statement, The date all supervisory review was completed for the annual statement, The priority of the company Whether the insurer has been designated as financially troubled (full review only), and Whether the insurer has been insolvent or placed into receivership within the last five years (full review only). 6. Does the department ensure that analysts analyze and supervisors review supplemental filings (MD&A, Annual Audited Financial Report, applicable holding company filings, etc.) of high priority insurers within 60 days from the receipt of filing? 7. Does the department ensure that analysts analyze and supervisors review supplemental filings (MD&A, Annual Audited Financial Report, applicable holding company filings, etc.) of non-priority insurers within 120 days from the receipt of filing?

4 8. Does the department ensure that analysts analyze and supervisors review holding company filings by Oct. 31 st for analysis conducted by the lead state and by Dec. 31 st for analysis conducted by the domestic state?

5 Financial Analysis continued b) Communication of Relevant Information to/from Financial Analysis Staff The department should ensure that all relevant information and data obtained that may assist in the financial analysis process is provided to the financial analysis staff. The department should ensure that findings of the financial analysis staff are communicated to the appropriate person(s) within the department. 1. Does the department have established procedures such that relevant information that is material and/or significant to the financial analysis process be: Communicated to the analysts (i.e., inquiry of individuals in other areas of the department on at least an annual basis regarding information that may be significant to the analysis process, department wide meetings, management meetings, staff meetings, etc.), Documented in the analysis files (i.e., responses from inquiries, memos to the file, etc.), Commented on in the analysis files as to how the information impacts the insurer, if at all? 2. In a separate attachment, provide such procedures as described in #1 above. procedures and any additional processes if there have been substantial changes from the previous submission of this information. 3. Does the department have established procedures that require financial solvency information that is material and/or significant (i.e., adverse findings, significant unresolved issues, etc.) obtained as a results of the financial process to be: Communicated to management and, as needed, to other department staff, and Documented in the analysis files (i.e., minutes of meetings, memos or notes to files, printouts, etc.)? 4. In a separate attachment, provide such procedures as described in #3 above. procedures and any additional processes if there have been substantial changes from the previous submission of this information. 5. Do department procedures require collaboration and documentation between the financial analysts and financial examiners throughout an examination including applicable follow-up on examination findings? Does this communication require an in-person meeting or conference call during planning? Does this communication require an in-person meeting or conference call at the conclusion of the examination?

6 Financial Analysis continued Accreditation Program Manual 6. In a separate attachment, discuss the collaboration between the financial analysts and financial examiners, including how such communication is documented, specifically detailing how communication occurs and what information is discussed: At the beginning of each examination, During ongoing examinations, and At the conclusion of each examination, including any examination findings that require follow-up by the analyst. *TE: The response to this question should be a joint response from both the financial analysis and financial examination areas; and should also address question B2b7. 7. For captive RRGs only: Do other sections within the department (such as legal or consumer affairs) receive or have information related to captive RRGs and is that information provided to the financial analysts, as applicable?

7 Financial Analysis continued c) Appropriate Supervisory Review The department s financial analysis process should provide for appropriate supervisory review and comment. Supervisory review may be conducted by the analyst s supervisor or a senior level analyst whose job functions include such review duties. 1. Does the financial analysis process require at least one level of supervisory review, as evidenced by sign-off and dating by the reviewer, on each company analysis? 2. In a separate attachment, discuss who is responsible for the supervisory reviews and the scope of the review. procedures and any additional processes if there have been substantial changes from the previous submission of this information. 3. Does the supervisory review process include an in-depth and challenging review of all significant workpapersthe risk assessment and significant supporting documentation and the analysis work performed (possibly via written and/or oral feedback)? 4. Does the supervisory review process include at least some review of source documents? 5. Is the supervisory review timely, usually within 2-3 weeks of completion of the original analysis? 6. Does the supervisory review encompass any written responses received from the company that contain significant information? 7. Do changes in a company s priority ranking require supervisory approval and evidence of that approval?

8 Financial Analysis continued d) Priority-Based Analysis The department s financial analysis procedures should be priority-based to ensure that potential problem companies are reviewed promptly. Such a prioritization scheme should utilize appropriate factors as guidelines to assist in the consistent determination of priority designations. 1. Are the financial analysis procedures priority-based to ensure that domestic companies with the highest priority are analyzed first? 2. Does the department s prioritization scheme allow for quantitative and qualitative factors and guidelines appropriate to the state s domestic industry to aide in determining an insurer s priority ranking? 3. In a separate attachment, discuss the department s prioritization scheme, including applicable quantitative and qualitative factors and guidelines used to assign a priority ranking. priority ranking discussion if there have been substantial changes from the previous submission of this information. 4. Do department procedures require justification for the priority ranking to be documented in the analysis files?

9 Financial Analysis continued e) Documented Analysis Procedures The department should have documented financial analysis procedures and/or guidelines to provide for consistency and continuity in the process and to ensure that appropriate analysis procedures are being performed on each domestic insurer. 1. Does the department utilize the NAIC Financial Analysis Handbook (Analysis Handbook) to document its analysis process? 2. If the answer to #1 is no, please attach a copy of the department s financial analysis handbook or procedures.if the department has developed additional procedures specifically related to performing financial analysis in addition to those required by the Analysis Handbook, please attach a copy of such policies and procedures. financial handbook or procedures if there have been substantial changes from the previous submission of this information. 3. If the answer to #1 is yes, has the department adopted additional procedures specifically related to performing an analytical review beyond those contained in the Analysis Handbook? 4. If the answer to #3 is yes, please attach a copy of those procedures. additional financial analysis procedures if there have been substantial changes from the previous submission of this information. 5. Does the department analyze consider and, at a minimum, sign off on information from the following to at least some extent for all domestic insurers: Annual Statement? Actuarial Opinion? Actuarial Opinion Summary? (property and casualty insurers and RRGs licensed as captives only) Regulatory Asset Adequacy Issues Summary? (life and fraternal insurers only) Management s Discussion and Analysis? Annual Audited Financial Statements? Holding Company Filings? Quarterly Statements (key financial data)? Financial ratios and NAIC financial analysis solvency tools, such as the scoring system and IRIS ratios? 6. For RRGs only: Are the following procedures performed and documented in the analysis file? Review the business plan to ensure that it is unchanged from the prior year Ensure that all changes in the plan of operations have been approved Review the reconciliation in Note 1 and ensure that it appears accurate and can be relied upon by others Review question 13.1 (largest net amount insured) and ensure that the amount agrees with the approved plan of operations

10 Ensure that the financial projections on file accurately reflect the operations as presently conducted Ensure that the Notes relating to the operation of the company agree with the approved plan of operations Financial Analysis continued 7. For domestic insurers that are part of an insurance holding company system and the state is the lead state, do department procedures require a group profile summary (GPS) to be completed and shared with all applicable states by October 31? 8. For domestic insurers that are part of an insurance holding company system and the state is the only state, do department procedures require a GPS to be completed by December 31? 9. For domestic insurers that are part of an insurance holding company system and the state is not the lead state, do department procedures require the nonlead state holding company system analysis checklist (or something similar) be completed by December 31? 10. For domestic insurers that cede XXX/AXXX business to affiliated or unaffiliated captives or special purpose vehicles, do analysts complete the related procedures contained in 1) the Supplemental Procedures-Form D section for any new proposed transactions; and 2) the Level 2-Reinsurance section for any existing transactions that have previously been approvedthe NAIC Financial Analysis Handbook that pertain to XXX/AXXX transactions, specifically Holding Company Analysis Form D Procedures and Reinsurance XXX/AXXX Captive Transactions Procedures?

11 Financial Analysis continued f) Appropriate Depth and Quality of Review The department s financial analysis procedures should ensure that domestic insurers receive an appropriate depth and quality of review commensurate with their financial strength and position. 1. Are the department s financial analysis procedures designed to allow for an appropriate depth and nature of review based on the complexity and the financial strength of the domestic insurers, including investigation and assessment of prospective risks withthat have the potential to affect the solvency of the insurer? 2. Does the department use procedures similar to NAIC s Level 2 Procedures when performing analyses of significant operations, or insurers with complex operations or material concerns? The use of the department s developed procedures or those from the Analysis Handbook is considered acceptable. 3. Are significant items, fluctuations from established norms, and other substantial issues raised during the analysis of companies, properly addressed and documented in the file? 4. If the department utilizes the non-troubled automated quarterly review tool, is the calculation substantially similar to that found in the Analysis Handbook for the applicable time period? 5. If the department utilizes the non-troubled automated quarterly review tool, and the insurer does not pass the automated review, and the analyst concludes that no further analysis is necessary, does the department s process require the analyst to document an appropriate justification why no further analysis was performed? 6. Does the analysis process require all significant company correspondence to undergo some level of analysis, including evidence of sign-off and conclusion on the adequacy of the response? 7. Does the analysis process require the Insurer Profile Summary (IPS) to include discussion/information on: The company s prospective exposure to each of the nine branded risk classifications, with adequate supporting detail? Financial analysis? Financial examination? Internal/external changes? Priority ranking? An overall conclusion regarding the insurer, including a summary of strengths and weaknesses? Supervisory plan? 8. Is the IPS updated after each of the following: Annual financial statement analysis? The conclusion of an on-site examination? Any significant information impacting the insurer was identified?

12 Financial Analysis continued 9. Does the GPS include discussion/information on the following commensurate with the nature and complexity of the group: The group s current and prospective exposure to each of the nine branded risk classifications? Corporate governance and enterprise risk management? An overall conclusion and supervisory plan? 9. At the completion of a financial analysis, does the conclusion discuss each of the following: The company s strengths and weaknesses? The company s exposure to material prospective risks? Whether any action should be considered as a result of the analysis? The company s priority and justification? g) Reporting of and Action on Material Adverse Findings The department s procedures should require that all material adverse findings be promptly presented to the commissioner or an appropriate designee for determination and implementation of appropriate regulatory action. Upon reporting of any material adverse findings from the financial analysis staff, the department should take timely action in response to such findings or adequately demonstrate the determination that no action is required. A material adverse finding is a finding made by a department with respect to an event, trend, transaction or series of transactions, fluctuation, agreement, arrangement, operating results or violation of law, which either has, or reasonably could have, a significant negative impact on a company s financial position. 1. Does the department have a policy or procedure that: Defines a material adverse finding? Requires that all material adverse findings be promptly presented to the commissioner or an appropriate designee? Requires that timely action, formal and/or informal, is taken in response to all material adverse findings? 2. In a separate attachment, please include such policy or procedure and discuss how the policy or procedure has been formally communicated to department staff (e.g., inclusion in procedures manual, , interdepartmental memo, etc.). *TE: The response to this question could apply to both the financial analysis and financial examination areas. If both areas utilize the same policy or procedure, please note as such for question B2i2. material adverse finding policy and how it has been communicated to department staff if there have been substantial changes from the previous submission of this information. 3. Do department financial analysis files contain evidence that the department followed its policy or procedure (discussed above) whereby the commissioner or appropriate designee was notified and timely action was taken or proper justification is in the file to demonstrate no action was required?

13 PART B2: FINANCIAL EXAMINATIONS Detail Eliminated to Conserve Space b) Communication of Relevant Information to/from Examination Staff The department should ensure that all relevant information and data obtained that may assist in the financial examination process is provided to the financial examination staff. The department should ensure that findings of the financial examination staff are communicated to the appropriate person(s). 1. Does the department have established procedures such that relevant information material and/or significant to the financial examination process be: Communicated to the EIC, Documented in the examination files (i.e., response to general inquiry, memos to the file, etc.), Commented on in the examination files as to how the information impacts the insurer, if at all? 2. In a separate attachment, provide the department s procedures that allow for all relevant information that is material and/or significant to the financial examination process to be communicated to the EIC. Also include a discussion of any additional processes developed to communicate relevant information to and from the financial examination process, including status reports. This attachment should include a discussion of the department s process for the EIC to inquire of individuals in other areas of the department during Phase 1 of the examination regarding information that may be significant to the examination. procedures and any additional processes if there have been substantial changes from the previous submission of this information. 3. Do the examination files properly document the EIC s consideration of such pertinent information? 4. Is there evidence in the examination files documenting communications with the EIC, chief examiner, financial analyst, department management and other department staff as needed, when financial solvency information that is material and/or significant (i.e., adverse findings) is obtained as a result of the financial examination process? 5. Does the EIC provide a status report to the chief examiner (or designee) at least monthly and include information as required by the NAIC Financial Condition Examiners Handbook (Examiners Handbook)? 6. Do department procedures require collaboration between the field examination and financial analysis functions throughout an examination? Does this communication require an in-person meeting or conference call during planning? Does this communication require an in-person meeting or conference call at the conclusion of the examination?

14 Financial Examinations continued 7. In a separate attachment, discuss the collaboration between the financial examiners and financial analysts, specifically detailing how communication occurs and what information is discussed: At the beginning of each examination, During ongoing examinations, and At the conclusion of each examination. *TE: The response to this question should be a joint response from both the financial analysis and financial examination areas; and should have been addressed in question B1b7. Provide additional information only if necessary. procedures and any additional processes if there have been substantial changes from the previous submission of this information Detail Eliminated to Conserve Space