SAMA is requiring all insurance companies to provide a full actuarial pricing update for medical and motor products on at least an annual basis, and will consider requiring more frequent updates if necessary.
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SAMA requires all companies approved to sell medical or motor products to provide full updated reports as follows:
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| | 1) | Medical, by 1 June 2014 |
| | 2) | Motor, by 1 July 2014
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For any medical/motor pricing reports, the Appointed Actuary must use up to date complete data to determine the premium rates. The data used in the report must be up to date when the report is submitted to SAMA. Specifically if a report is submitted between:
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| | 1) | 1 March to 31 May: it must use complete data up to at least 31 December of the previous year. |
| | 2) | 1 June to 31 August: it must use complete data up to at least 31 March of the same year |
| | 3) | 1 September to 30 November: it must use complete data up to at least 30 June of the same year. |
| | 4) | 1 December to 31 December: it must use complete data up to at least 30 September of the same year. |
| | 5) | 1 January to 28 February: it must use complete data up to at least 30 September of the previous year.
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Medical/Motor products approval may be withdrawn if the updated actuarial pricing reports are not submitted or are not compliant with SAMA’s instructions.
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The insurance company’s Appointed Actuary should prepare the medical and motor pricing reports that are to be submitted to SAMA unless the insurance company has obtained SAMA’s no objection to ask another actuary to prepare the pricing reports at least three months before the date of the actuarial report submission. It should be noted that SAMA will only allow another actuary to be used only if it is justified, and SAMA will require a report to be submitted from the Appointed Actuary in addition to those prepared by the other actuary. It should be noted that there are no restrictions on the preparation of technical or actuarial reports that are not submitted to SAMA.
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The insurance company should note that it is acceptable to provide partial submissions to SAMA from the Appointed Actuary in respect of
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| | | a. | Revisions to credibility formula |
| | | b. | Changes to recommended loadings |
| | | c. | Pricing of a single product within the medical or motor class
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The insurance company may seek SAMA’s approval to submit partial pricing submissions from the Appointed Actuary in other circumstances.
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SAMA’s written no objection is needed before any actuarial pricing report or partial submission is implemented. It is, however, always acceptable to charge higher premium rates than those determined by the Appointed Actuary, subject to such rates being fully documented and justified and in line with Article (46) of Implementing Regulations.
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It should be noted that there is no requirement for the company to submit any actuarial pricing report to SAMA unless required by this Circular, or the company wishes to amend its rating structure.
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If the company makes any material alteration in its reinsurance arrangements for medical or motor insurance, then it must consult with its Appointed Actuary to determine whether the recommended loadings in the premium rates remain adequate, and must amend its rates as appropriate.
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Minimal Requirements And Considerations For The Medical And Motor Pricing Reports must be followed in all subsequent reports. These are set out in an Appendix to this Circular.
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It should be noted that the Appointed Actuary must recommend premium rates with no cross subsidies between the rating factors, in line with Article 46 of the Implementing Regulations. However if, for competitive purposes, the company wishes to charge rates which have some element of cross-subsidisation, then it may ask the Appointed Actuary to prepare an additional report setting out the risks of applying the cross-subsidies, based on expected portfolios of business written which may not be too dissimilar to the in-force portfolio. SAMA will review the cross-subsidy report separately.
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The company should submit a corresponding underwriting manual, rating structure and premium rates that meet the Minimal Requirements And Considerations For The Medical And Motor Pricing Reports. The rating structure and premium rates should be in Excel spreadsheet format.
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The Appointed Actuary is responsible to ensure a comprehensive and concise report is provided to SAMA as to minimize the extent of required follow-up queries from SAMA.
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In addition, the Appointed Actuary must prepare a short summary document highlighting his key findings for each actuarial pricing report. This should be no more than 5 pages in length, and should be submitted to the Board of Directors of the company as a Board paper within five working days of the Appointed Actuary’s submission, with the Appointed Actuary’s full report being an appendix to the Board paper.
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The actuarial pricing reports submitted to SAMA cannot be preliminary or initial and are required to be the final reports. The reports should clearly summarize and compare the Company’s current premium rates (loads and discounts) and the new premium rates (loads and discounts) calculated by the Appointed Actuary.
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