Actuarial Notes

Risk Transfer Practice Note

By Committee on Property and Liability Financial Reporting of the American Academy of Actuaries · American Academy of Actuaries · 2022

Study guides: Exam CP-341, Exam GI-301, Exam GI-302

A November 2022 public policy practice note developed by the American Academy of Actuaries' Committee on Property and Liability Financial Reporting. Its purpose is to provide information to actuaries on current practices in which their peers are engaged related to the determination of the existence of risk transfer within insurance and reinsurance contracts. It updates the Risk Transfer Testing Practice Note released in January 2007, and is not an actuarial standard of practice or binding upon any actuary.

On the syllabus

1 Introduction

  • 1.1 What are practice notes?
    • 1.1.1 Discussion
  • 1.2 Purpose of this practice note
    • 1.2.1 Discussion
    • 1.2.2 Terms of construction

2 Executive Summary

3 Introduction—Background and Purpose

  • a. Background
  • b. Purpose

4 Definitions of Risk Transfer Within Accounting Standards and Statements and Their Implications

  • a. Accounting Standards and Statements
    • i) U.S. Statutory
    • ii) Financial Accounting Standards Board
    • iii) International Accounting Standards Board (IASB)
    • iv) European Insurance and Occupational Pensions Authority (EIOPA)
  • b. Compare and Contrast
  • c. Summary Table

5 Determination of Risk Transfer

  • a. Process flow
    • i. Does Risk Transfer Exist?
    • ii. Controls
  • b. Responsibilities for Determination
    • i. Determination
    • ii. Categorization of Contracts
  • c. Actuarial Support for Determination of Risk Transfer
    • i. Common Techniques and Methodologies for Testing Risk Transfer
    • ii. Process for Applying these Methods
    • iii. Tools Available for the Methods

6 Required Documentation and Disclosures

  • a. U.S. Statutory
  • b. Ceding Company
  • c. Actuary
  • d. Risk Transfer Documentation

7 Conclusion

8 Appendices (Links)

Sources