SOA•ILA Module

Module Overview Module Introduction Many government and quasi-government agencies regulate life insurance companies. They exercise authority over both the life insurance industry and the individual companies. Regulation and taxation affect product design—sometimes by incentive and sometimes by required standards. For example, the states in the United States have laws that govern solvency of companies and also often levy state premium taxes. Regulation: Laws and rules that govern financial services industries. Taxation: System to raise revenue for governments. This module addresses regulation and taxation separately. Through this module, you will: Understand the basis for those laws and how they serve the public’s interest. Become familiar with key international regulatory topics. Apply the legal and regulatory principles to realistic examples. Relate the regulatory environment to product design and management. Consider the effect that the conduct of people in various roles has on the solvency of life insurance companies. Be introduced to the various government agencies that regulate insurance and annuity products and companies in the United States and Canada and the laws under which they operate. Understand the basis for those laws and how they serve the public’s interest. Module Objectives By the end of your module study you will be able …

Read more

Module Overview Domestic/Foreign/Alien Insurance Companies U.S. insurance departments classify insurance companies as “domestic,” “foreign” and “alien.” Insurance companies formed outside the United States may be authorized to do business in the United States. These non-U.S. companies are called “alien”. The McCarran-Ferguson Act Regulation of life insurance in the United States has always been primarily a responsibility of the various states, as originally the sale of life insurance contracts was considered to be a local event and not interstate commerce. However, in 1944, a Supreme Court ruling (the South-Eastern Underwriters Association case) stated that insurance was indeed interstate commerce and therefore subject to federal regulation. One result of this decision was that the Sherman Act, the Clayton Act and the Federal Trade Commission Act would all apply to the business of insurance. Among other things, these acts would have seriously restricted or outlawed the ability of insurance companies to use data from rating bureaus (which combine information from many insurance companies) for ratemaking purposes. This decision caused both insurance regulators and insurance companies to ask the U.S. Congress to pass a law permitting the regulation of insurance to remain at the state level. Congress agreed and passed the McCarran-Ferguson Act in …

Read more

Developing an ERM Framework ERM Framework Criteria (Effective ) Scope is enterprise-wide All risk categories included Focused on key risks Enhances decision making ability Integration across risk type Aggregated metrics Balanced risk & return management Appropriate disclosures Measures value impacts Primary stakeholder focus Challenges to ERM Analysis The implementation of a strong ERM framework must address three primary hurdles. Quantification of strategic and operational risks Imprecise formulation of risk appetite Decision making is not integrated with an ERM analysis ERM Process ERM Frameworks use a control cycle process similar to that of general actuarial work, consisting of the identification, quantification, decision making, and communication of risks across the company. Risk Identification In the initial stage of the framework process, all the risks in the universe are mapped into company specific categories based on the potential losses to the company that are relevant to its business plan. Typically this categorization breaks down into: Strategic risks Operational risks Financial risks Net Risks Risks are by default discussed on a “gross” basis, without reflecting the value of techniques used to reduce such risks. But for the purposes of finalizing the quantification, the value of any risk mitigation should be subtracted from the gross …

Read more

[mathjax] Introduction The Introduction to ILA module will give an overview of the role of an actuary in a Life and Annuity context. The module will give a strong foundation of understanding of life insurance and annuity product features, markets and distribution. Candidates will also learn the fundamentals of product development, pricing, reinsurance, valuation, financial reporting and administration. This module lays the groundwork for the Fellowship exams in the Individual Life and Annuities track. Module Learning Objectives Understand the role of actuaries in an insurance company context. Understand life insurance and annuity product types, benefits and product features; insurance market, consumer needs and distribution channels; and types of companies in the insurance space. Assess the financial reporting environment including key stakeholders. Understand the basic product designs, design process and actuarial cycle. Understand the theory of reserving. Understand the basic insurance administration, underwriting of insurance risks and payments of claims. The Introduction to ILA module consists of six sections: Module Introduction and Role of the Actuary Products, Markets, and Company Type Insurance Company Financial Reporting Environment Product Development Process Basic Principles of Reserving Insurance Administration, Underwriting, and Claims Module Introduction and Role of the Actuary The goal of this section is …

Read more