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2006 PARIS. The Realities and Duties of 21 st Century – Insurance Consulting Actuaries: after and beyond SOX. Chairman : Nick Dexter UK Presenters : Mike Renetzky US Ad Kok The Netherlands. 1 st June 2006 11:00 – 12:30. - PowerPoint PPT Presentation
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2006 PARIS
The Realities and Duties of 21st Century – Insurance Consulting Actuaries: after and beyond SOX
Chairman: Nick Dexter UK
Presenters: Mike Renetzky US
Ad Kok The Netherlands
1st June 2006 11:00 – 12:30
The Realities and Duties of 21st Century - Insurance Consulting Actuaries: after and beyond SOX
Michael K. Renetzky, Esq.PartnerLord, Bissell & Brook LLPChicago, USA
This presentation is solely for educational and informational purposes. It is not intended to constitute
legal advice or to create an attorney-client relationship.
SOMMAIRE/ SUMMARYSarbanes-Oxley Act of 2002
A - Scope B - Brief Overview C - Evaluation
The NAIC and SOX for Insurance Companies A - Reinsurance Attestations B - Internal Controls C - Other SOX Matters
The Role for Consulting Actuaries A - Reinsurance and Risk Transfer B - Model Audit Rule and Other Opportunities
Scope• United States of America • Congress response to egregious acts
– Enron, WorldCom, Tyco, Adelphia• Primarily impacts public companies
Sarbanes-Oxley Act of 2002
Brief Overview• Audit Committees• Gatekeepers• Senior executive
certifications/attestations
Sarbanes-Oxley Act of 2002
Brief Overview cont’d• Internal Controls• Code of Ethics• Whistleblower protection• Insider transactions
Sarbanes-Oxley Act of 2002
Evaluation• PCAOB report• GAO report• SEC advisory panel• Commissioner Glassman• SEC/PCAOB roundtable
Sarbanes-Oxley Act of 2002
Evaluation cont’d• Voluntary compliance
– Nonprofit sector– Non-US companies (e.g. Lafarge)
Sarbanes-Oxley Act of 2002
NAIC and State Developments
Reinsurance Attestations• Effective with 2005 Annual Statements• Scope
– Reinsurance contracts for which financial statement credit is taken
– January 1, 1994 - enter, renew or amend
NAIC and State Developments
Reinsurance Attestations cont’d• To the best of CEO/CFO’s knowledge
and belief after diligent inquiry– No side letters or agreements affecting
actual or potential loss– Documentation of economic intent and risk
transfer analysis (unless self-evident)
NAIC and State Developments
Reinsurance Attestations cont’d• To the best of their knowledge and
belief after diligent inquiry– Compliance with SSAP No. 62– Appropriate controls to monitor use of
reinsurance and compliance with SSAP No. 62
NAIC and State Developments
Reinsurance Attestations cont’d• Risk transfer
– Is it self-evident?– Is a significant risk transferred?– Cash flow testing
NAIC and State Developments
Reinsurance Attestations cont’d• Cash flow testing
– Build the model– Assumptions regarding ultimate loss, loss
payment patterns, discount rates– Test historical results and hypothetical
scenarios
NAIC and State Developments
Internal controls• Proposed revisions to Model Audit Rule• Applies to non-public insurance
companies• Exemption thresholds• Accreditation process
NAIC and State Developments
Internal controls cont’d• Status
– NAIC/AICPA working group– Financial Condition (E) committee– Possible adoption this month?
NAIC and State Developments
Internal controls cont’d• No accountant attestation; report to
management in lieu• SAS 60 or equivalent requirement
NAIC and State Developments
Internal controls cont’d• Management report
– Management is responsible for establishing and maintaining controls
– Controls are effective to the best of management’s knowledge and belief, after diligent inquiry
NAIC and State Developments
Internal controls cont’d• Management report
– Statement of approach for evaluation– Disclosure of unremediated material
weaknesses
NAIC and State Developments
Other SOX Matters• Outside directors/independent directors• Independent auditor standards
– prohibition on certain actuarial services• Code of ethics
The Role for Consulting Actuaries
• Reinsurance and risk transfer analysis• Controls relating to reserve creation and
maintenance• Consultants to outside directors• Fill need created by proposed limitations on
independent auditors
Michael K. Renetzky, Esq. Lord, Bissell & Brook LLP
Atlanta - Chicago - London - Los Angeles -New York - Washington
[email protected](312) 443-1823
The Realities and Duties of 21st Century - Insurance Consulting Actuaries
After and beyond SOX
Ad KokPrincipalWatson Wyatt Ltd.
SOMMAIRE/ SUMMARYAre Actuaries in control now?
A - Documentation B - Processes C - Positioning
The Actuarial Relationships A - Management B - Supervisors C - Auditors D - Risk managers
Role for Consulting Actuaries A - Show me and do not trust me B - Beyond Sox C - External sign off
• Documentation– Lagging behind
• Processes– Enabling to control– Responsibilities
• Positioning– Independent
Are Actuaries in control now?
• Management– Reporting structure
• Supervisors– International consensus?– Agreed framework?
• Auditors– Agreed roles and responsibilities?
• Risk Managers– Existing relationship?
The Actuarial Relationships
• Show me and do not trust me– External vs. Internal
• Beyond Sox– Control framework
• External sign-off– Irreversible development?
Role for Consulting Actuaries
SOMMAIRE/ SUMMARY
Are Actuaries in control now?
The Actuarial Relationships
Role for Consulting Actuaries