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2006 PARIS

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.

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2006 PARIS

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  1. 2006 PARIS

  2. 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

  3. The Realities and Duties of 21st Century - Insurance Consulting Actuaries:  after and beyond SOX Michael K. Renetzky, Esq. Partner Lord, Bissell & Brook LLP Chicago, USA

  4. This presentation is solely for educational and informational purposes. It is not intended to constitute legal advice or to create an attorney-client relationship.

  5. SOMMAIRE/ SUMMARY • Sarbanes-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

  6. Scope United States of America Congress response to egregious acts Enron, WorldCom, Tyco, Adelphia Primarily impacts public companies Sarbanes-Oxley Act of 2002

  7. Brief Overview Audit Committees Gatekeepers Senior executive certifications/attestations Sarbanes-Oxley Act of 2002

  8. Brief Overview cont’d Internal Controls Code of Ethics Whistleblower protection Insider transactions Sarbanes-Oxley Act of 2002

  9. Evaluation PCAOB report GAO report SEC advisory panel Commissioner Glassman SEC/PCAOB roundtable Sarbanes-Oxley Act of 2002

  10. Evaluation cont’d Voluntary compliance Nonprofit sector Non-US companies (e.g. Lafarge) Sarbanes-Oxley Act of 2002

  11. 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

  12. 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

  13. 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

  14. Reinsurance Attestations cont’d Risk transfer Is it self-evident? Is a significant risk transferred? Cash flow testing NAIC and State Developments

  15. 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

  16. Internal controls Proposed revisions to Model Audit Rule Applies to non-public insurance companies Exemption thresholds Accreditation process NAIC and State Developments

  17. Internal controls cont’d Status NAIC/AICPA working group Financial Condition (E) committee Possible adoption this month? NAIC and State Developments

  18. Internal controls cont’d No accountant attestation; report to management in lieu SAS 60 or equivalent requirement NAIC and State Developments

  19. 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

  20. Internal controls cont’d Management report Statement of approach for evaluation Disclosure of unremediated material weaknesses NAIC and State Developments

  21. Other SOX Matters Outside directors/independent directors Independent auditor standards prohibition on certain actuarial services Code of ethics NAIC and State Developments

  22. 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 The Role for Consulting Actuaries

  23. Michael K. Renetzky, Esq. Lord, Bissell & Brook LLPAtlanta - Chicago - London - Los Angeles - New York - Washingtonmrenetzky@lordbissell.com(312) 443-1823

  24. The Realities and Duties of 21st Century - Insurance Consulting Actuaries After and beyond SOX Ad Kok Principal Watson Wyatt Ltd.

  25. SOMMAIRE/ SUMMARY • Are 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

  26. Documentation Lagging behind Processes Enabling to control Responsibilities Positioning Independent Are Actuaries in control now?

  27. Management Reporting structure Supervisors International consensus? Agreed framework? Auditors Agreed roles and responsibilities? Risk Managers Existing relationship? The Actuarial Relationships

  28. Show me and do not trust me External vs. Internal Beyond Sox Control framework External sign-off Irreversible development? Role for Consulting Actuaries

  29. SOMMAIRE/ SUMMARY • Are Actuaries in control now? • The Actuarial Relationships • Role for Consulting Actuaries

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