Bryan Sigurdson, FSA, FCIA

Transcription

1 May 8, 2013 Vancouver, BC Bryan Sigurdson, FSA, FCIA Vice-President, Actuarial & Product, and Chief Actuary Co-operators Life Insurance Company 1

2 Although I ve never been to an actuarial conference, I am absolutely positive that compliance and complaints are more exciting. Erica Hiemstra Director, Distribution and Consumer Affairs CLHIA April 10,

3 The Actuary The Thrill of Victory The Agony of Defeat 3

4 I m from Western Canada? I m an actuary? I know something about compliance? former Appointed Actuary former Chief Risk Officer Shawna invited me! 4

5 The Co-operators Group Limited Co-operators Financial Services Limited Co-operators General Insurance Company Co-operators Life Insurance Company Addenda Capital Inc. (74%) $35 Billion in assets under administration $3 Billion in direct written premium 4,600 employees Guelph, Ontario Canada s #1 insurance brand - unaided brand recognition A multi-line organization 5

6 Co-operators Life Insurance Company The CUMIS Group Limited (73%) TIC Travel Insurance Coordinators Ltd. $6 Billion in assets $1 Billion in premium 1,100 employees Regina, Saskatchewan 6

7 Co-operative Roots The Co-operators Group Limited is owned by 45 member-owners Co-operatives, credit unions and like-minded organizations Agricultural, financial, service, retail/consumer, health and labour sectors Distribution Multi-channel, but featuring: 450 agencies of Co-operators General 350 credit unions 7

8 Some definitions: A financial professional who deals with the financial impact of risk and uncertainty A place where they bury dead actors A computer without the personality Someone who tells you about a problem you never thought you had, and in a way you can t understand 8

9 Think of an actuary as the architect and engineer of life and health insurance Designing and pricing products Ensuring the company is structurally (actuarially) sound Calculating the liabilities for future policy obligations Determining risk-based capital requirements Examining the financial condition of the company 9

10 Local Actuary Drowns 10

11 PUTTING ALL OF THE PIECES TOGETHER 11

12 ICA OSFI Guidelines AML & ATF Consumer Complaints AMF Guidelines Market Conduct Privacy Canadian Anti-SPAM Legislation AODA Ombudsman 12

13 Per OSFI Corporate Governance Guidelines Financial Risk Management Compliance Internal Audit Actuarial Per OSFI Supervisory Framework Add: Senior Management Board 13

14 Oversight Functions Finance Risk Management Internal Audit Actuarial Compliance 14

15 Oversight Functions Finance Risk Management Internal Audit Actuarial Compliance 15

16 Compliance Compliance Actuarial Compliance 16

17 Q: What s the difference between an introverted actuary and an extroverted actuary? A: The extroverted actuary stares at your feet when he talks to you Q: What do actuaries use as birth control? A: Their personalities There are three kinds of actuaries: Those that can count And those that can t. 17

18 Role and Duties of the Appointed Actuary (E-15) per ICA, OSFI Guidelines and Memoranda: value the actuarial and other policy liabilities (365) in accordance with accepted actuarial practice additional direction from the Superintendent using appropriate methods and assumptions report and opine on the results of the valuation in the financial statement (367) to the shareholders and policyholders at the annual meeting (367) in the annual return (667(1) in the Appointed Actuary s Report to OSFI (667(2) OSFI annual memorandum to the AA 18

19 report annually on the company s expected future financial condition (368) In accordance with the Canadian Institute of Actuaries (CIA) standard of practice on Dynamic Capital Adequacy Testing (DCAT) report to senior management and the board any matters that have material adverse effects on the financial condition of the company and that require rectification and advise the Superintendent if suitable action is not being taken (369). report to the directors on the fairness and continuing fairness to participating policyholders of: par account management policy (165(3.2)) policyholder dividend policy (165(3.1)) report to the directors on the fairness of a proposed dividend and whether it is in accordance with the dividend policy (464(2)) 19

20 opine that the methods for allocating expenses (458) and investment income (457) to the par account are fair and equitable, and report annually on their continuing fairness and equitableness (460). report on whether amounts transferred to the shareholder account from the par account would materially affect the company s ability to comply with its dividend policy or maintain the level of dividends paid (461(c)) report on the fairness and continuing fairness of the criteria for making changes to adjustable policies (165(3.3)) report annually on whether changes made to adjustable policies during the preceding 12 months are fair to adjustable policyholders and are in accordance with the established criteria (464.1(1)) Minimum Continuing Capital and Surplus Requirements (MCCSR) confirm that the instructions in the MCCSR Guideline have been followed in completing the return opinion and memorandum covering areas requiring discretion or judgment or where significant technical calculations were applied. 20

21 OSFI s Supervisory Framework defines the responsibilities of the Actuarial function to go beyond the legal requirements of the AA to include: evaluating the design and pricing of insurance products reviewing the adequacy of reinsurance programs analyzing stress testing results and the process used to establish the adequacy of capital under adverse conditions AND per Superintendent Julie Dickson s remarks to the 2011 CIA Annual Meeting: Compliance OSFI places huge value on looking beyond technical compliance, to responding to the purpose and spirit of regulatory requirements. 21

22 External auditor (AuG-43) Peer Review (E-15) OSFI review of Appointed Actuary s Report OSFI examinations Internal internal audit internal actuarial peer review compliance with internal policies Policy Liability Valuation Product Design and Pricing Risk Management Policy Compliance Review Committee LCMS 22

23 Actuaries should look at the work of Compliance, e.g. setting Margins for Adverse Deviation in the determination of actuarial liabilities support for certain opinions participating account risk dashboard complaints register 23

24 So how does it all fit together? 24

25 Board Senior Management Financial Risk Management Compliance Internal Audit Actuarial Operational Management 25

26 26

27 So, let s start at the top 27

28 BOARD Senior Management 28

29 The Board and Senior Management are ultimately accountable for the safety and soundness of the company, and its compliance with governing legislation. 29

30 Wikipedia: Tone at the Top is a term that originated in the field of accounting and is used to describe an organization s general ethical climate, as established by its board of directors, audit committee, and senior management. Boise State University: Tone at the Top is a term that is used to define management s leadership and commitment towards openness, honesty, integrity and ethical behaviour. It is the most important component of the control environment. The tone at the top is set by all levels of management and has a trickle-down effect on all employees. 30

31 Structure stature and authority, mandate status and visibility OSFI Corporate Governance Guideline: Effective corporate governance is not only the result of hard structural elements, but also soft behavioural factors driven by dedicated directors and management performing faithfully their duty of care to the institution. Independence independent of operational management Access formal and informal meetings with and without the presence of other senior management Commitment resources and budget interest and engagement Responsiveness to issues follow up on concerns 31

32 I m tone deaf Why is it not called Tone from the Top? It s the bottom that really counts the day to day. Compliance is an oversight function. Values are important. One of the key elements to the effective operation of a compliance management framework is the financial institution s commitment to promoting values related to proper conduct in compliance matters. (AMF Compliance Guideline) At The Co-operators we strive for the highest level of integrity foster open and transparent communication but it s how you walk the talk 32

33 Beware of the Spitzer Effect Risk Appetite The risk appetite statement defines the types and amount of risk that the organization is willing to accept in pursuit of its strategic objectives. OSFI s draft Own Risk and Solvency Assessment (ORSA) guideline notes that a factor to consider with respect to regulatory compliance risk is the degree to which an insurer encourages or pursues strategies that may fall into grey areas that exist in laws, regulations or other rules and requirements. The Co-operators Group risk appetite: Although unintentional breaches of regulatory requirement may occur, there is no tolerance for individual who deliberately commit fraud or act contrary to any regulatory requirement. Create awareness Have some FUN with it!! 33

34 Buzz Lightyear (Bryan s version) 34