• CAPI Chapter 7 CAPI Chapter 7 Actuarial reporting

    Note for chapter 7

    This chapter sets out—

    (a) the key requirements for reporting by actuaries; and
    (b) criteria for reporting actuaries to ensure their independence, education, skill and experience.
    Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI Part 7.1 CAPI Part 7.1 Obligations of firms

      • CAPI 7.1.1 Firms must prepare report

        (1) A QFC captive insurer that conducts long term insurance business must prepare a financial condition report on an annual basis.
        (2) A QFC captive insurer that conducts general insurance business must—
        (a) consider, on an annual basis, the need to prepare a financial condition report; and
        (b) prepare a financial condition report at least once every 3 years.
        (3) A financial condition report must be prepared and signed by the reporting actuary.
        (4) The day the reporting actuary signs the financial condition report is the reference date for the purpose of dating the financial condition report.

        NoteLong term insurance business and general insurance business are defined in the glossary.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 7.1.2 Firms must appoint reporting actuary

        (1) A QFC captive insurer that is required to prepare a financial condition report must appoint an actuary (the reporting actuary) to prepare the report.
        (2) An individual must not be appointed as a reporting actuary unless the individual meets the following criteria:
        (a) the individual has appropriate formal qualifications as an actuary and is a member of a recognised professional body;
        (b) the individual must not be exercising the controlled functions of senior executive function, executive governance function or non-executive governance function of the firm, or of a related body corporate (except when that related body corporate is a subsidiary of the firm);

        Note Controlled function and senior executive function are defined in the glossary.
        (c) the individual is neither—
        (i) an auditor approved under article 85 (1) of the QFC Companies Regulations or article 37 of the Limited Liability Partnerships Regulations (the approved auditor) for the firm; nor
        (ii) an employee or director of an entity of which the approved auditor is an employee or director; nor
        (iii) a partner of the approved auditor;
        (d) the individual has a minimum of 5 years relevant experience in the provision of actuarial services to insurers, in the QFC or in other jurisdictions, that is sufficiently recent to ensure familiarity with current issues in the provision of actuarial services to insurers.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 7.1.3 Firms must ensure access to relevant data, etc

        (1) A firm that is a QFC captive insurer must ensure that a reporting actuary has access to all relevant data, information, reports and staff of the firm that the actuary reasonably believes are necessary to fulfil the actuary's responsibilities.
        (2) A firm must also take all reasonable steps to ensure that the reporting actuary has access to the firm's contractors.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI Part 7.2 CAPI Part 7.2 Financial condition reports

      • CAPI 7.2.1 Purpose and standards of financial condition reports

        (1) A financial condition report for a firm that is a QFC captive insurer must give—
        (a) an objective assessment of the overall financial condition of the firm; and
        (b) if the firm conducts long term insurance business — an objective assessment of the financial condition of each long term insurance fund established by the firm.

        Note Long term insurance business and long term insurance fund are defined in the glossary.
        (2) In preparing a financial condition report, a reporting actuary must have regard to the relevant professional standards.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 7.2.2 What must be included in financial condition reports?

        (1) A financial condition report must include, at a minimum—
        (a) the business overview described in subrule (2); and
        (b) an assessment of the suitability and adequacy of the firm's risk management policy; and
        (c) an assessment of the firm's experience and profitability for the year ending on the valuation date; and
        (d) an assessment of the value of the firm's insurance liabilities; and
        (e) an assessment of the adequacy of past estimates of the value of insurance liabilities, especially if there has been a change in the assumption or in the valuation method used by the firm since the last valuation; and
        (f) an explanation of the following matters relating to the valuation of insurance liabilities:
        (i) the assumptions used in the valuation process, including assumptions about inflation and discount rates, future expense rates and, if relevant, future investment income;
        (ii) the adequacy and appropriateness of data made available to the reporting actuary by the firm;
        (iii) the procedures undertaken by the reporting actuary to assess the reliability of the data;
        (iv) the model or models used by the reporting actuary;
        (v) the approach taken to estimate the variability of the estimate;
        (vi) the sensitivity analyses undertaken; and
        (g) if the firm conducts long term insurance business — a determination of the value of surplus (the surplus determination) in each long term insurance fund established by the firm.

        Note A surplus determination is required before any distribution of surplus is made under rule 8.4.2 (Assets not to be transferred for other purposes) or rule 8.4.4 (Distributions by firm or cell deemed to constitute single long term insurance fund).
        (2) For subrule (1) (a), the business overview must—
        (a) describe how the firm operates, including reinsurance arrangements made by the firm; and
        (b) state whether the reporting actuary considers the reinsurance arrangements suitable and adequate and the reasons why the reporting actuary considers them to be so; and
        (c) describe the documentation for reinsurance arrangements; and
        (d) state whether the firm has limited risk transfer arrangements and, if it has, describe the impact of the arrangements; and
        (e) comment on the pricing of the firm's products, including the adequacy of premiums; and
        (f) include any other general matter that is relevant to, and that gives a general understanding of, the firm's business.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 7.2.3 Consideration of outlook and future implications

        (1) A reporting actuary must consider the outlook and any future implications for a matter required, under rule 7.2.2, to be in the financial condition report (a relevant matter).
        (2) If the outlook or future implication of a relevant matter is adverse, the reporting actuary must propose recommendations to address the matter.
        (3) A reporting actuary may rely on expert opinion if the actuary feels unqualified to comment on a relevant matter.
        (4) Any expert opinion relied on by the actuary must be identified as such in the financial condition report.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 7.2.4 Time for giving report

        (1) A reporting actuary must give the financial condition report to the firm within such time as to give the governing body of the firm reasonable opportunity to—
        (a) consider and use the financial condition report in preparing the firm's annual returns; and
        (b) give the financial condition report to the Regulatory Authority in accordance with subrule (2).
        (2) A financial condition report for a firm must be given to the Regulatory Authority within 3 months after the day the relevant financial year of the firm ends.
        Amended by QFCRA RM 2019-1 (as from 28th March 2019).

    • CAPI Part 7.3 CAPI Part 7.3 Additional reports, special reviews and costs

      • CAPI 7.3.1 Regulatory Authority may require additional reports

        (1) The Regulatory Authority may, by written notice, require a firm to prepare financial condition reports more frequently than required under rule 7.1.1 (Firm must prepare report) if the authority considers it necessary or desirable for the prudential supervision of the firm.
        (2) The financial condition report must be prepared and signed by the reporting actuary.
        (3) A firm must give to the Regulatory Authority the report required under subrule (1) within the period stated in the notice, unless the authority gives an extension of the period in writing.

        Note Writing is defined in the glossary.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 7.3.2 Regulatory Authority may require special purpose reports

        (1) The Regulatory Authority may, by written notice, require a firm—
        (a) to undertake a special purpose review of matters relating to the firm's operations, risk management or financial affairs, and
        (b) to prepare a report on the review.
        (2) A special purpose review and report must be undertaken and prepared by a reporting actuary unless the Regulatory Authority appoints an actuary to undertake the review and prepare the report.
        (3) A special purpose review and report must be undertaken and prepared in accordance with relevant professional standards.
        (4) The special purpose report must—
        (a) be prepared and signed by the actuary who prepared it; and
        (b) be given by the actuary simultaneously to the Regulatory Authority and the firm within 3 months after the date of the written notice requiring the report, unless the authority gives an extension of the period in writing.

        Note Writing is defined in the glossary.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 7.3.3 Costs of reports and reviews

        (1) The costs of financial condition reports for a firm must be borne by the firm.
        (2) The costs of any special purpose review and report for a firm must be borne by the firm.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)