Thematic review of reports by life insurance undertakings’ actuarial functions in 2021 – better reports to support the board of directors’ work
In its thematic review, the FIN-FSA found variation among life insurance undertakings in the quality of actuarial reports and responsible actuary’s reports under the Insurance Companies Act. The main shortcoming identified by the FIN-FSA was the low usability of the reports from the perspective of management of the undertaking. The FIN-FSA has issued several recommendations to the undertakings on the content of actuarial reports and the handling of the reports.
A key statutory task of the actuarial function is to ensure the correctness of technical provisions. Incorrect technical provisions also have a bearing on the solvency capital requirement and the undertaking’s own funds. In order for the management of the insurance undertaking to be aware of considerations pertaining to technical provisions, the actuarial function is statutorily required to produce a report to be submitted to the board of directors at least on an annual basis regarding:
- tasks undertaken by it and their results
- deficiencies identified, if any
- recommendations as to how such deficiencies should be remedied.
Correspondingly, the risk management function shall conduct an own risk and solvency assessment at least on an annual basis.
In addition, responsible actuaries shall prepare a report to the board of directors for risk management and investment operations regarding:
- requirements posed by the nature and yield requirement of technical provisions as well as the preservation of solvency and liquidity
- appropriateness of the management of the underwriting risks of the undertaking.
The thematic review focused on reports prepared by the actuarial function, but in some undertakings, topics typically covered by the actuarial report were found in the responsible actuary’s report. The review also considered these reports to certain extent.
The FIN-FSA emphasises that the actuarial report shall be part of the dialogue between the undertaking’s board of directors and the actuarial function. To fulfil its purpose, the actuarial report must be visionary and transparent. The present thematic review includes several recommendations helping the undertaking to ensure the viability of the dialogue.
The FIN-FSA’s assessment is based on undertaking-specific analysis, which is shared with the undertakings as part of ongoing supervision.
For further information, please contact:
Jari Niittuinperä, Chief Actuary, telephone +358 9 183 5517 or jari.niittuinpera(at)finanssivalvonta.fi