ICA.Ch47

Most. Boring. Paper. Ever. It's just a bunch of bullet points written in legalese. Luckily, there is little that isn't also covered by OSFI.AA. Study Strategy: Pay particular attention to sections 203 & 359-370 as these account for ~90% of old exam questions, some of which overlap with OSFI.AA anyway.   Forum

Pop Quiz

• What are the objectives of a peer reviewer to the AA?
• Hint: AAC

BattleTable

Based on past exams, the main things you need to know (in rough order of importance) are:

• CFO as AA - when is it permitted
• duties of the audit committee
• different way AA can leave the appointment
• reporting requirements of AA to Board of Directors & CEO

Top Questions ← Questions you absolutely need to know!

reference	part (a)	part (b)	part (c)	part (d)
E (2018.Fall #30)	OSFI.AA	reporting requirements: - AA ==> BoD & CEO	AA resignation: - actions of new/old AA
E (2017.Fall #29)	AA leaves: - how can it happen	CFO as AA: - when is it permitted	reporting requirements: - AA ==> BoD & CEO
E (2016.Fall #24)	see CIA.MfAD	see BCAR.Cdn	see OSFI.MCT	(d) CFO as AA: when is it permitted (e): see OSFI.ORSA
E (2016.Spring #1)	see Baer.Intro	see McD.Intro	foreign insurers: - legal requirements
E (2015.Spring #32)	CFO as AA: - when is it permitted	see OSFI.AA	see OSFI.AA	AA leaves: - how can it happen
E (2013.Fall #9)	see Baer.Intro	duties: - audit committee
E (2013.Fall #34)	see OSFI.AA	see OSFI.AA	CFO as AA: - when is it permitted
E (2012.Fall #36)	duties: - audit committee	reporting requirements: - AA ==> BoD & CEO

In Plain English!

Corporate Governance (ICA VI): Directors & Officers (165-203)

• In OSFI.AA, we covered roles and duties of the AA, and goals of the peer reviewer to the AA.
  • Other important components in the organizational structure of an insurer are the BoD (Board of Directors), and the Audit Committee. Part VI of ICA.Ch47 covers both of these components.
• According to section (165.2) in ICA.Ch47, the Board of Directors performs high-level functions such as:
  • ESTABLISHING PROCEDURES to resolve conflicts of interest
  • ESTABLISHING COMMITTEES: Audit committee, Conduct Review committee, committee to Monitor conflict resolution procedures
  • Another way of thinking of the BoD is that it's responsible for setting the direction (or overall strategy), and for overseeing management. That's the way the BoD is described in the reading OSFI.CorpGov. The function of the BoD has not been asked on prior exams, but it seems like a good question.

• According to section (203.3), the Audit Committee performs various review functions, meets with various functional heads, and requires management to implement internal controls.
  • (Both the BoD & Audit Committee are discussed in OSFI.CorpGov, although in a slightly different way than this ICA reading. This often happens when articles on similar topics are written by different authors.)

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Corporate Governance (ICA VI): Actuaries (357-370)

• Here we focus on sections (357-370). The examiners like to ask when a CFO may be the AA, so let's cover this. The CFO may also be the AA if...
  • ...the audit committee provides a written statement to OSFI that the requirements of both (CFO, AA) can be adequately & independently performed
  • (and if OSFI subsequently authorizes the appointment)
• Some form of this question has been asked 3 times: (2016.Fall #24d), (2015.Spring # 32a), (2013.Fall #34c). You should definitely look at the answers given in the examiner's reports, but you'll notice that the answers for the different exams are a little different. I've noticed this before: The same question on different exams has different answers, and there have been cases where a valid answer for one exam was not accepted on a subsequent exam. So, if in doubt, take the answer from the most recent exam.

• Other old exam questions ask about the reporting duties of the AA to the BoD and CEO. (2012.Fall #36b)
  • Generally, the BoD would get a high-level report (not too many details) on the FinPos (Financial Position) of the company, and the FinCond (Financial Condition) including DCAT.
  • The CEO would get something a little more detailed than what was given to the BoD, something on any MAEs (Material Adverse Events) that require rectification.

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Foreign Companies (ICA XIII)

• The only other item worth mentioning is the requirements that are placed on foreign companies before they may issue insurance in Canada:
  • must have ASSETS > 5m vested in trust (or as per superviser)
  • must APPOINT (actuary, auditor)
  • must ESTABLISH chief agency
  • must have min MCT / BAAT ratio
  • any other conditions super deems appropriate

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BattleCodes

• Memorize:
  • duties of BoD, Audit Committee
  • requirements for a CFO to also be the AA
  • requirements for foreign companies to sell insurance in Canada

• Conceptual:
  • Understand the organizational structure of an insurance company from the top down: BoD, CEO, AA & Senior Management (Each have their particular duties)

• Calculational:
  • none

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POP QUIZ ANSWERS

• The objectives of a peer review to the AA: AAC

A: ASSIST OSFI to assess InsR [safety, soundness]

A: ASSIST AA by providing [Independent Advice, a source of Professional Development]

C: increase CONFIDENCE in AA: with (management, public, regulators)