2014 S 25 part b
Link to exam question:
I am trying to sort out the answers in examiner report for the part b. It seems like three possible disclosures are mixed together: intercompany pool or voluntary/involuntary pools and work of others.
Answer 1: "This must be disclosed in the Scope Section of the SAO. It must be disclosed that the review was performed and the results were found reasonable by another actuary and that an independent review was not performed." looks like intercompany pool in scope, but disclosure is similar to work of others and voluntary/involuntary pools.
Answer 2: "In the SAO opinion section, disclose reliance on other actuary’s opinion. Also disclose name, affiliation, and qualifications of other actuary." looks like work of others which is all right.
Answer 3: "In the Scope Section, actuary should disclose that the review of the other actuary’s work took place and the extent of the review". looks like work of others but disclose in scope.
Comments
Link to exam question:
The way this question was asked allowed for several different answers. The scenario given in the problem mentioned both work of others and intercompany pooling so there's more than one place where disclosures are required. You didn't have to list all of them however, just 2, and the sample answers covered different acceptable answers. Here is a link to a section in the wiki that discusses disclosures in the SCOPE section:
And here's a link that discusses disclosures in the OPINION section regarding "work of others"
If the question had asked for ALL disclosures required in the SAO, you would have had to list all these different items and this would have been a more difficult question.
Link to exam question:
the question says "underwriting pool". does this mean intercompany or voluntary/involuntary? I supposed former is disclosed in scope and latter is disclosed in relevant comments.
Link to exam question:
You can't tell which type of pool it is from the information given in the problem so an answer referring to either one should be acceptable. Just to make sure anyone else reading this post knows what we're talking about:
According to the COPLFR text: (section 5.3.3)
And further discussion may be required in the Relevant Comments section of the SAO per these instructions:
So this would include item 10 of Exhibit B on voluntary and involuntary underwriting pools.
For intercompany pooling: (section 3)
All in all, this was not a great exam question because of the ambiguity. That's probably why the graders accepted such a broad range of answers.
Thank you for your explanation. I have a follow up question. what do we need to disclose about the intercompany pooling in scope. I remember there is a question asking about it and we need to disclose
• Description of the pool
• Names of all pool participant
• identification of the lead company
• Pooling percentages for each participant
• state of domicile of each member
Is scope a right place for these?
Yes, that's correct. That list is provided in the first paragraph in section 3 of COPLFR. And an example of the language that could be used for this is:
Same exam question, but for part a: could you have answered that the discounts should be disclosed in the Scope section as well? 3.2 stated basis of presentation also lists that these need to be disclosed here...
I think the answer to whether it could instead be disclosed in the scope section is no. The Scope section and the Relevant Comments section serve different purposes in the Statement of Actuarial Opinion (SAO).
The Scope section mainly identifies the reserve items upon which the Appointed Actuary is providing an opinion and the basis for the presentation of those reserve items. This includes mentioning the review date, the data relied upon, and a brief description of any intercompany pooling arrangements. The focus here is on setting the boundaries and foundations of the actuarial opinion.
The Relevant Comments section, on the other hand, is designed to discuss specific details and considerations that directly impact the reserves or the actuarial opinion. This includes any significant assumptions, methods, changes, and, importantly, the use of discount rates or amounts that are not typical or require additional explanation.
Given the distinct roles of these sections, disclosures regarding discount rates used, the basis of those rates, and discount amounts generally fit more naturally within the Relevant Comments section, where the actuary can provide detailed explanations and context. While the Scope section outlines what the opinion covers and on what basis, the Relevant Comments section delves into the specifics that affect the actuarial judgments made.