Actuarial Work Rules for Insurance
The Saudi Arabian Monetary Authority has issued these Rules according to the Governor’s decision number (441/186) dated 06/07/1441H, to replace the Actuarial Work Regulation for Insurance and/or Reinsurance Companies issued according to the Governor’s Decision number (72/437) dated 25/03/1437H, based on the powers vested to SAMA by the Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated 02/06/1424H (corresponding to 31/07/2003), and its Implementing Regulation issued by the Decision of the Minister of Finance No. (1/596) dated 01/03/1425H (corresponding to 20/04/2004).
Introduction and Definitions
Article 1
These Rules shall be complied with in conjunction with the Cooperative Insurance Control Law and its Implementing Regulation and SAMA’s Instructions.
Article 2
Definitions: the following terms and phrases, wherever mentioned herein, shall have the meaning assigned thereto, unless the context otherwise requires:
1. SAMA: Saudi Arabian Monetary Authority.
2. The Law: the Cooperative Insurance Companies Control Law.
3. Implementing Regulation: the Implementing Regulation of the Cooperative Insurance Companies Control Law.
4. Kingdom: the Kingdom of Saudi Arabia.
5. Rules: Actuarial Work Rules for Insurance.
6. Person: A natural person or juristic entity.
7. Insurance: Mechanism of contractually shifting burdens of pure risks by pooling them.
8. Reinsurance: Transfer of the Insured’s risk from the Insurance Company to the Reinsurance Company and to indemnify the Insurance Company by the Reinsurance Company for any payments made to the Insured policyholder against damages or loss.
9. Insurance Company: A company that accepts Insurance contracts directly from Insured(s).
10. Reinsurance Company: An Insurance or Reinsurance Company that accepts Insurance contracts from another Insurance Company.
11. Insured: A natural person or juristic entity, which has entered into an Insurance contract with an Insurance Company.
12. Beneficiary: A natural person or juristic entity, to whom the benefit(s) under the Insurance policy is assigned as a result of a covered loss.
13. Retention: The amount of risk kept by an Insurance company in its own books, in comparison with Insurance risks ceded to a Reinsurance company.
14. Technical Provisions (Reserves): Insurance liabilities i.e. the value set aside to cover expected losses arising on a book of Insurance policies and its financial obligations.
15. Company: A company conducting Insurance and/or Reinsurance activities that has been approved by SAMA to conduct such business.
16. Actuary: Person who conducts various statistical and probability theories whereby services are priced; liabilities are assessed and provisions calculated.
17. Actuarial Candidate: A natural person who either holds an actuarial degree or is actively studying for actuarial examinations set by an Actuarial Association.
18. Associate Actuary: A natural person who is qualified as an Associate member of an Actuarial Association.
19. Qualified Actuary: A natural person who is qualified as a Fellow of an Actuarial Association.
20. Appointed Actuary: The Qualified Actuary who is appointed by the Company to undertake the responsibilities specified in these Rules and the Implementing Regulation and SAMA’s instructions.
21. Actuarial Function: The department of a Company that consists of one or more Qualified Actuaries, Associate Actuaries and Actuarial Candidates and other natural persons to assist and support the actuarial work of the Company as required in these Rules.
22. Actuarial Services: The rendering of advice, recommendations, findings, and opinions by Appointed Actuaries to Companies in connection with these Rules.
23. Actuarial Services Provider: A juristic person that provides Actuarial Services in accordance with these Rules, employing Qualified Actuaries who may be permitted to act as an Appointed Actuary in accordance with these s Rules
24. Actuarial Association: An accepted association or organization by SAMA of Qualified and Associate Actuaries and Actuarial Candidates which is a member of the International Actuarial Association, admitting its members through a program of professional examinations.
25. Insurance Contract Assets and Liabilities: For the purposes of these Rules, the assets and liabilities in accordance with applicable financial reporting standards in the Kingdom.
26. Peer Review: Reviewing the work of an Appointed Actuary for the purposes of these Rules to ensure it complies with these Rules and the professional standards of the Actuarial Association of which the Appointed Actuary is a member.
27. SAMA’s Instructions: Regulations, rules, instructions and circulars issued by SAMA.
28. Senior Management: The Managing Director, Chief Executive Officer, General Manager, their deputies, Chief Financial Officer, Managers of key departments, officers of risk management, internal audit, and compliance functions, and similar positions in the financial institution, in addition to incumbents of any other positions determined by SAMA, excluding only for the purpose of these Rules, the Head of the Actuarial Function.
29. Technical Price: The price for an insurance policy determined by the Appointed Actuary using the actuarial basis applicable at the time of issuing/ renewing the policy.
Scope
Article 3
These Rules apply to Companies, their Boards of Directors and Senior Management, Appointed Actuaries or those whom are entrusted to carry out the work on their behalf, Heads and staff of Actuarial Function and Actuarial Services Providers.
Objectives
Article 4
The objectives of these Rules are to regulate the following:
1. Minimum standards for the licensing of Actuarial Services Providers.
2. Minimum standards of actuarial work within the Kingdom.
3. Minimum standards for the role and responsibilities of Appointed Actuaries, and procedures for their appointment.
4. Minimum standards for the Actuarial Function of Insurance and/or Reinsurance companies within the Kingdom, and where relevant, the Head of Actuarial Function.
5. Responsibilities of the Company, Board of Directors and Senior Management in respect of the Appointed Actuary and Actuarial Function’s work.
Compliance Measures
Article 5
In conjunction with the provisions of the Law and its Implementing Regulation, no Person shall act as an Appointed Actuary or Head of Actuarial Function or act as an Actuarial Services Provider in the Kingdom unless the Company or Actuarial Services Provider obtains SAMA’s prior statement of non-objection.
Article 6
1. Companies, Appointed Actuaries and Actuarial Service Providers must establish appropriate written internal controls and procedures to ensure and monitor their compliance with these Rules.
2. These internal controls and procedures should ensure that all required tasks are carried out and reports submitted to SAMA by prescribed deadlines.
3. This does not replace the professional standards of the Appointed Actuary’s Actuarial Association.
4. Companies, Appointed Actuaries and Actuarial Service Providers must maintain adequate records that demonstrate their compliance with these Rules.
Article 7
The records maintained by the Company to demonstrate compliance with these Rules, include but not limited to documents indicating the appointment or change of Appointed Actuaries and Heads of Actuarial Function, agreements with Appointed Actuaries clarifying their roles and responsibilities and details of qualifications and experience of Appointed Actuaries and Heads of Actuarial Function.
Licensing of Actuarial Services Providers
Article 8
An Actuarial Services Provider licensed in the Kingdom, must meet the requirements of SAMA’s Instructions before commencing activities subject to these Rules.
Article 9
If the Appointed Actuary is not licensed in the Kingdom, the Appointed Actuary has to be an employee, director or partner of an Actuarial Service Provider and the Company must provide required information to obtain SAMA’s statement of non-objection.
Article 10
All Appointed Actuaries who are not Company employees must, either;
1. Be licensed as an Actuarial Service Provider under Article (8) of these Rules or be a partner, director or employee of an Actuarial Service Provider licensed under Article (8) of these Rules, or be licensed as Qualified Actuary in the Kingdom, or;
2. Be licensed or permitted to provide services of an actuarial nature outside the Kingdom under Article (9) of these Rules.
Requirements and Procedures to Appoint and Terminate the Appointed Actuary and Minimum Requirements for the Actuarial Function within Companies
Article 11
The Appointed Actuary appointment requirements:
The Company shall, after obtaining SAMA`s statement of non-objection, appoint a Qualified Actuary to act as its Appointed Actuary who meets the requirements of these Rules and SAMA’s Instructions and has adequate experience in the types of business written by the Company, being at least a Fellow of an Actuarial Association with relevant post-qualification experience.
Article 12
A Company must take steps through its contract with its Appointed Actuary to ensure that the Company, its Board of Directors and Senior Management can consult the Appointed Actuary as needed on matters relating to his or her responsibilities in accordance with these Rules throughout the year.
Article 13
The Appointed Actuary shall not hold any position which may conflict with their role as Appointed Actuary, including a member on the Board of Directors, Senior Management or Chief Executive Officer in the Company or related Company or any other Insurance and/or Reinsurance Company in the Kingdom.
Article 14
Members of the Board of Directors and the Chief Executive Officer of the Company shall not act as the Appointed Actuary to the Company nor as a member of its Actuarial Function .
Article 15
Any non-Saudi Actuary works with a Company or Actuarial Service Provider in the Kingdom shall obtain SAMA’s statement of non-objection.
Article 16
Minimum Requirements of Actuarial Function within Companies:
The Company shall establish an Actuarial Function commensurate with the scale and complexity of its business, consisting of Actuaries and other individuals as prescribed in the Appendix (1) of Establishing the Actuarial Function within the Re/Insurance Company, to ensure compliance with SAMA's requirements in respect of Insurance Contract Assets and Liabilities, Technical Prices, monitoring the adequacy of premiums, experience studies, capital adequacy, Reinsurance and quantitative aspects of risk management, and to support actuarial works of the Company.
Article 17
The Company shall facilitate the Actuarial Function in fulfilling a significant role in a Company’s systems of financial management, risk management and internal control and take steps to ensure that the Actuarial Function is properly authorized and staffed commensurate with the sound operation of the Company and the safeguarding of the interests of its policyholders and Beneficiaries.
Article 18
For the purpose of implementing these Rules, the Appointed Actuary and Head of the Actuarial Function shall liaise with the Board of Directors, Senior Management and the Company’s internal and external auditors and direct the activities of the Actuarial Function, including providing oversight of the provision of training and professional development for the Actuarial Function.
Article 19
Procedure to Appoint and termination of an Appointed Actuary and/or Head of Actuarial Function:
Prior to seeking SAMA’s statement of non-objection to the appointment of the Appointed Actuary and Head of Actuarial Function, the Company’s Senior Management must satisfy itself that the proposed Appointed Actuary and Head of Actuarial Function are experienced in the lines of Insurance and or Reinsurance transacted by the Company, and are fit and proper and meet the requirements of SAMA’s Instructions, making a recommendation to the Board of Directors accordingly and providing SAMA with evidence that the requirements of SAMA’s Instructions are met.
Article 20
The contract between a Company and its Appointed Actuary must ensure that the Company has sufficient notice of any intention of the Appointed Actuary to terminate his or her contractual relationship with the Company through the use of an appropriate notice period in order to enable the Company to fulfil its obligations under these Rules.
Article 21
A Company must inform SAMA of any potential future change in its Appointed Actuary of which it becomes aware at least (60) calendar days ahead of such change taking effect.
Article 22
A Company shall certify to SAMA each year by a date to be set by SAMA’s Instructions that the Company have considered whether the Appointed Actuary remains a fit and proper person and has no conflicts of interest in order to hold the role of Appointed Actuary for the forthcoming calendar year.
Article 23
SAMA may require a Company to appoint an appropriately experienced Qualified Actuary who is not the Company’s Appointed Actuary or appoint an appropriately experienced Qualified Actuary directly to produce a report on specified matters on a case by case basis at the expense of the Company to which it relates.
Article 24
Termination of the Appointed Actuary:
1. A Company must inform SAMA of any resignation, dismissal, cancellation or termination of its Appointed Actuary and the reasons for this within (5) calendar days of it taking effect.
2. If the Appointed Actuary is an employee of the Company, the role of the Appointed Actuary at the Company shall end in any of the following cases:
a. Resignation or dismissal of the Appointed Actuary.
b. Cancellation or termination of the contract governing the employment the Appointed Actuary.
3. If the Appointed Actuary is not an employee of the Company the role of the Appointed Actuary shall end in any of the following cases:
a. Resignation or dismissal of the Appointed Actuary by the Actuarial Services Provider in the Kingdom of which they are a partner, director or employee. In case of dismissal SAMA shall be notified of the reason(s) for the dismissal by the Actuarial Services Provider within (5) calendar days of it taking effect, and where the Actuarial Service Provider is outside the Kingdom, the Company must notify SAMA within (5) calendar days of it taking its effect.
b. Upon the expiry, cancellation or termination of the contract governing the provision of Actuarial Services.
Article 25
If SAMA finds that an Appointed Actuary is unfit or incapable of undertaking his or her responsibilities, SAMA may notify the Company to replace the Appointed Actuary with another competent Qualified Actuary, who can better fulfil the role of the Appointed Actuary. The role of the Appointed Actuary will end if SAMA notifies the Company to replace him or her.
Article 26
If a Company becomes aware that its Appointed Actuary wishes to resign from his or her position, the Company must commence the procedures to appoint a replacement immediately, and such procedures must reasonably take into account the time required by SAMA to issue or not as the case may be a statement of non-objection for the replacement Appointed Actuary, such that at no time is the Company without an Appointed Actuary.
Article 27
In case the Company fails to appoint a replacement Qualified Actuary to act as its Appointed Actuary, SAMA shall appoint an Appointed Actuary at the Company's expense if considered appropriate on a case by case basis.
Article 28
A Company must make appropriate provisions in its contract with its Appointed Actuary such that on prior to ceasing to hold the role of the Appointed Actuary, the former Appointed Actuary must provide all information and explanations as the successor Appointed Actuary, Senior Management and Board of Directors of the Company may reasonably require, at the Company’s expense, within no more than (30) calendar days of appointment of the successor Appointed Actuary.
Article 29
Following appointment of a replacement Appointed Actuary he or she shall obtain all required information and explanations from the Company and its previous Appointed Actuary, and the Company shall take all reasonable steps to facilitate the discharge of this responsibility within no more than (30) calendar days of appointment of the replacement Appointed Actuary.
Article 30
On termination or cessation of office as Appointed Actuary, the Appointed Actuary shall notify the Board of Directors and SAMA within (10) calendar days of whether there are any disagreements or matters associated with their termination or ceasing to hold office that, in their professional opinion, SAMA and the board should be aware of.
Article 31
The Company may inform the Actuarial Association of its Appointed Actuary of any observations on the proficiency of the Appointed Actuary.
Role and Responsibilities of the Appointed Actuary
Article 32
For the purpose of providing unbiased and objective advice in accordance with these Rules, the Appointed Actuary shall act in good faith, honestly and reasonably, exercise due care and diligence and independent judgement in the best interests of the Company and its policyholders, putting the interests of the Company and its policyholders ahead of any personal interests and avoiding conflicts of interest with the exercise of his or her responsibilities.
Article 33
The Appointed Actuary shall:
1. Perform the work entrusted to them in accordance with actuarial principles and standards issued by the Actuarial Association of which they are a member and be accountable to that Actuarial Association as regards compliance with that Actuarial Association’s professional standards as well as to SAMA as regards compliance with these Rules and SAMA’s Instructions.
2. Perform their duties with honesty, integrity and competence, avoiding conflicts of interest and providing unbiased and objective advice, and shall not conceal any facts relating to the Company's financial or technical position or knowingly provide incorrect information.
3. Not disclose the Company's confidential information, or information obtained during the performance of his or her work while he or she is fulfilling his or her responsibilities or after its completion except that this disclosure is to SAMA, or an application of relevant regulations or SAMA’s Instructions.
4. Review and take responsibility for all work carried out on their behalf.
5. Keep records of their work subject to strict data confidentiality, organized according to their Actuarial Association’s professional standards. The records shall include the copies of the documents that must be provided to the Company and to SAMA, and the base data from which the documents have been derived and all supporting calculations.
6. Where the Appointed Actuary is not an employee of the Company, the records referred to in Item )5( above must be held within the Company and retained by the Company for at least ten years within the Company after the date of the report to which the records or documentation relates, and must be accessible only to the Appointed Actuary and his or her delegates, the Company and SAMA.
7. Perform Actuarial Services where competent and appropriately experienced to do so.
8. Ensure consistency of their work with applicable financial reporting standards in the Kingdom.
9. Advise on any other matters as instructed by the Board of Directors and Senior Management, provided that this does not conflict with his or her responsibilities as set out in these Rules and SAMA’s Instructions.
Article 34
In addition to the roles and responsibilities set out in these Rules, the Appointed Actuary of a Company authorized to transact Protection and Savings insurance business shall undertake the following:
1. Perform a profit test of the adequacy of premium rates at the introduction of new products and whenever it is proposed that premium rates shall be revised, and advise on Technical Prices.
2. Advise on the terms and conditions of insurance policies, including the fairness of expenses charged and investment returns allocated to policyholders.
3. Determine and ensure the adequacy of insurance contract Assets and Liabilities including Mathematical Reserves, based on appropriate experience studies.
4. Advise on the determination of the allocation of surplus, profits or bonuses to the with-profits Protection and Savings insurance policyholders.
Article 35
The Appointed Actuary shall have the right to access the board papers, accounting books and other records and documents, business plans, supporting analyses and schedules deemed necessary for the carrying out of their duties and be entitled to obtain from the Board of Directors and Senior Management of the Company the information and explanations the Appointed Actuary deems necessary, subject to appropriate controls to maintain the confidentiality of the Company’s information by the Appointed Actuary, and all those who assist the Appointed Actuary in the discharge of his or her responsibilities.
Role and Responsibilities of the Board of Directors and Senior Management as Regards the Appointed
Article 36
The Board of Directors and Senior Management of the Company must ensure that the responsibilities of the Appointed Actuary can be carried out without delay. This includes:
1. Providing the Appointed Actuary with direct access to the Board of Directors and Senior Management and internal and external auditors of the Company.
2. Providing the Appointed Actuary with access to such information and explanations as needed to comply with these Rules.
3. Responding to requests for information from the Appointed Actuary in an accurate, comprehensive and timely manner.
4. Considering and taking such actions as they consider appropriate based on the recommendations included in all reports provided by the Appointed Actuary.
5. Ensure the effectiveness, adequacy and objectivity of the Appointed Actuary, for instance, ensuring the appropriate performance of his role, and the adequacy and effectiveness of the internal procedures and systems, technical program used, and human resources.
Article 37
If the Appointed Actuary is unable to obtain such information, explanations and resources from the Board of Directors and Senior Management as they reasonably require to carry out their responsibilities the Appointed Actuary shall report the matter to SAMA if appropriate action is not taken within (10) working days of reporting such matter to the Board of Directors in writing.
Reporting by the Appointed Actuary
Article 38
The Appointed Actuary must ensure that each actuarial report they produce in accordance with these Rules and SAMA’s Instructions is clear, comprehensive and presented by him or her in a manner which adequately explains and gives sufficient prominence to issues and developments which have material implications for the Company, or the interests of its policyholders or Beneficiaries, so that another Qualified Actuary can follow the report and come to a consistent conclusion.
Article 39
Each actuarial report produced in accordance with these Rules and SAMA’s Instructions should, as a minimum:
1. Contain an executive summary setting out its results and key findings.
2. Set out in an introduction the purpose of the report, the credentials of the Appointed Actuary, and a description of the subject business and the risks this gives rise to, relevant summary information on the Company’s system of risk management, and any other relevant background information in the judgement of the Appointed Actuary.
3. Contain a clear statement that the report is made by an individual acting in a formal capacity as the Appointed Actuary.
4. State the actuarial guidance and financial reporting standards that are being followed.
5. Set out any reliances and limitations including commentary on materiality, areas of uncertainty and any restrictions that the Company or any other party has imposed that prevents full access to the information required, so that a suitably informed reader can form a view on the weight to be attached to the reported findings.
6. Any reliance on an external source should be cited.
7. Refer to the results of the previous report on the same subject matter explaining key differences from the results previously reported, including providing appropriate details of all key changes with regard to data, methodology, assumptions and results.
8. Contain an explanation of the data received and checks performed on the data to check its veracity and comprehensiveness. Any data-specific limitations should be listed.
9. Explain the approach and methodology adopted including an explanation of the choice of methodology and assumptions and an explanation of why these are considered appropriate, addressing both the subject matter of the report and its results, and any specific matters that have affected the approach to the analysis.
10. Summarize and highlight any changes to the methodology and assumptions from the previous report, and the reasons for such changes should be fully explained to supplement the summary of changes provided at (7) above.
11. Provide evidence of sufficient analysis and details of calculations (including Appendices) together with the calculations and other workings to enable a suitably informed reader to reproduce the analysis in order to check the results. These calculations should be consistent with current financial reporting standards in the Kingdom where applicable.
12. Set out results and conclusions clearly and comprehensively including any required explanations and commentary.
13. Explain the scope of the Peer Review process and the identity and credentials of the peer reviewer and their conclusions.
14. Set out a glossary of terms used that may not be clear to the reader.
15. Disclose any other relevant matters.
Article 40
The Appointed Actuary shall comply with the Peer Review requirements of their Actuarial Association in carrying out their responsibilities in accordance with these Rules and SAMA’s instructions, having satisfied themselves that the peer reviewer is independent of the subject matter to be reviewed and appropriately qualified and experienced.
Article 41
1. The Appointed Actuary must take appropriate steps to effectively engage the Board of Directors and Senior Management in the findings of his or her reports, presenting and discussing findings directly with the Board of Directors and with the Audit and/or Risk Committee and, where relevant, the Company’s internal and external auditors.
2. Communication between the Appointed Actuary and the Senior Management and Board of Directors on actuarial matters shall be timely and the method of communication must be appropriate, having regard to the purpose and significance of the subject matter.
Article 42
The Appointed Actuary must take reasonable steps to ensure that any report or communication with which he or she is associated is effective, not misleading and cannot reasonably be misinterpreted. The technical components of actuarial reports shall be presented in a manner that can be understood and acted upon by a suitably informed reader to support effective and informed decision-making by the Board of Directors and Senior Management.
Article 43
The Appointed Actuary shall report on an urgent basis (known as an Urgent Interim Report) directly to the Company’s Board of Directors and the Compliance Function in the Company in the following cases, notwithstanding that the Appointed Actuary may not have completed their analysis and investigations:
1. If there are immediate or future threats facing the Company that may significantly adversely affect it, including but not limited to the following:
a. Solvency
b. Obligations of Reinsurance Companies and the Company's obligations to its Reinsurance Companies
c. Risk Retention levels
d. Profitability of the Company's products
e. Pricing of the Company's products
f. Adequacy of Insurance contract liabilities.
2. If the Company has evidently breached the provisions of the Law and its Implementing Regulation or these Rules or SAMA’s Instructions about the Company’s financial position, Insurance Contract Assets and Liabilities (including where relevant Technical Provisions), or any matter that may affect the interests of the policyholders or the Beneficiaries of Insurance policies or future policyholders or future Beneficiaries of Insurance policies.
3. If the Company does not allow the Appointed Actuary to perform the duties and responsibilities assigned to them under the Law and its Implementing Regulation, these Rules and SAMA’s Instructions.
Article 44
The Board of Directors shall examine any Urgent Interim Report and recommend and implement corrective actions, and forward such measures and all related information on actions taken and planned to the Appointed Actuary and SAMA no later than (10) working days of receiving any Urgent Interim Report.
Article 45
If the Appointed Actuary is not reasonably satisfied with the response of the Board of Directors to any Urgent Interim Report they shall send a copy of their report to SAMA within (15) working days of its issue.
Article 46
SAMA may provide observations and questions on any actuarial reports that are submitted by an Appointed Actuary and such actuarial reports must be resubmitted to address any such observations and questions raised by SAMA.
The Appointed Actuary’s Responsibilities in Respect of the Data
Article 47
1. The Appointed Actuary must take all reasonable steps to ensure the consistency, accuracy and completeness of the data used in their analysis. All reports required by these Rules and SAMA’s instructions should contain, as a minimum, the following:
a. Confirmation that the available data allows the desired analysis to be completed in the Appointed Actuary’s professional judgement and with due regard to professional standards.
b. Disclosure of known material data limitations and their implications, and how allowance has been made for the data limitations in the results presented and analysis performed.
c. A full description of the data that was used.
d. A full description of all data validations carried out.
e. The precise period of investigation that the data is derived from must be stated.
f. Reasonableness checks against data in the most recent prior report should be described.
g. An explanation of any adjustments or filtering of the raw data, and the impact estimated.
2. An Appointed Actuary’s report shall not include caveats that seek to place full reliance on others for data quality. The Appointed Actuary shall carry out sufficient checks to satisfy himself or herself as to the results of the report presented.
3. Data limitations are to be remediated by the Company in full in the period in which they are identified. Where full remediation is not possible the timing for remediation is to be estimated by the Appointed Actuary and reported in the current report immediately following the identification of the data limitations, appropriate provision made to account for such data limitations in the subject report and progress reported in all future relevant reports until such data limitations are remediated and the provisions for data limitations are released.
Data Confidentiality
Article 48
Companies must establish a documented code of conduct, internal policies, procedures and controls and sufficient safeguards to ensure the confidentiality of all data within the scope of these Rules, whether in written, electronic, or other digital form, and to monitor and ensure compliance with that code of conduct and applicable data privacy or confidentiality obligations.
As a minimum, the code of conduct, internal policies, procedures and controls must address:
1. The physical, electronic and cyber security of data:
a. Within the Company,
b. When data is being exchanged and reports transmitted to and from the Appointed Actuary, where the Appointed Actuary is not an employee of the Company,
c. Held by the Appointed Actuary, where the Appointed Actuary is not an employee of the Company, and
d. Reports being transmitted to SAMA.
2. Whether data may be transmitted outside the Kingdom, and what additional safeguards are required if this is the case (such as encryption or requiring Actuarial Services to be carried out on the Company’s premises and using its information technology systems).
3. Compliance with the Company’s code of conduct and the effectiveness of controls over the confidentiality of data within the scope of these Rules must be tested at least annually.
Article 49
The Company, the Appointed Actuary and the Actuarial Service Provider shall comply with all relevant data confidentiality and protection laws and regulations of the Kingdom.
The Appointed Actuary’s Role in Respect of Reserving
Article 50
Annually and for each reporting period as specified by SAMA the Appointed Actuary shall:
1. Determine and recommend to the Board of Directors and Senior Management the Company's Insurance Contract Assets and Liabilities (including where relevant Technical Provisions), using appropriate methodologies and assumptions for their determination, consistent with current financial reporting standards applicable in the Kingdom.
2. Perform actual versus expected analysis by comparing actual experience with previous relevant estimates of claims and other liabilities where relevant.
3. Prepare the appropriate reports in accordance with SAMA instructions.
4. In respect of Protection and Savings insurance business,:
a. Determine and ensure the adequacy of the Insurance Contract Assets and Liabilities (including where relevant) Mathematical Reserves).
b. Advise on the determination of the allocation of surplus, profits or bonuses to the policyholders.
The Appointed Actuary’s Role in Respect of Pricing and Pricing Adequacy
Article 51
The Appointed Actuary shall, as a minimum, in respect of every Company that is an Insurer:
1. Investigate, advise and report to Senior Management, the Board of Directors and to SAMA in the form of a Pricing Report at least annually on the Technical Pricing of the risks in the insurance company’s Medical Expense, Motor and Protection and Savings products and such other classes of business as are required by SAMA’s instructions; and,
2. In respect of Protection and Savings Insurance business:
a. Perform a profit test of the premium rates.
b. Review and advise on product development and design, including the terms and conditions of Insurance contracts and pricing, along with the estimation of the capital required to underwrite the products
3. Report to Senior Management, the Board of Directors and to SAMA on the above in accordance with SAMA’s Instructions to be known as the Pricing Report/s and Pricing Adequacy Report/s and as per the Board of Directors’ and Senior Management’s instructions.
Article 52
1. A Company and its Appointed Actuary should derive Technical Prices using the Company’s own experience where this information is available and reliable.
2. In the absence of the Company’s own experience, for example when entering a new line of business, Technical Prices may be developed from other sources, but appropriate allowance should be made for any differences between the Company’s data and the source from which the information has been derived.
Article 53
The Appointed Actuary of an Insurance Company shall submit such periodic pricing adequacy reports, comparing actual selling prices for its Insurance contracts with the relevant Technical Prices, to SAMA, the Company’s Senior Management, Board of Directors, in respect of its Medical Expense and Motor classes of business, and such other classes of business as are required by SAMA’s Instructions.
Article 54
SAMA may require an Insurance Company to submit to SAMA a supplementary pricing report or pricing adequacy report from its Appointed Actuary in such form and at such timing as it prescribes on a case by case basis at the expense of the Insurance Company.
Article 55
SAMA may require a Reinsurance Company to submit to SAMA such information on the Technical Pricing of the risks it accepts and retains, as SAMA shall from time to time prescribe.
The Appointed Actuary’s Role in Assessing Solvency and Capital
Article 56
1. The Appointed Actuary shall investigate and provide advice to the Company on its current solvency position and the adequacy of the capital that it holds by projecting the Company’s solvency position into the future under varying assumptions in order to assess its financial strength and identify the major risk factors affecting the Company.
2. The Appointed Actuary shall investigate and provide advice to the Company on its prospective solvency position by conducting stress tests and scenario analysis under various assumptions and performing capital adequacy assessments, evaluating the relative impact of the output from such tests and analysis on the Company’s assets, liabilities, and actual and future capital levels and business plans, and shall investigate and advise on the development and use of models for these purposes. These investigations should be consistent with current financial reporting standards applicable in the Kingdom and take into consideration any of SAMA’s Instructions issued from time to time.
3. The results of these investigations are to be reported to Senior Management, the Board of Directors and SAMA in a form and at dates as prescribed by SAMA.
The Appointed Actuary’s Role in Risk Management
Article 57
The Appointed Actuary shall:
1. Coordinate with the Company’s risk management officers on estimating the impact of material risks and identifying appropriate mitigation techniques for those risks and provide input into SAMA’s risk management requirements.
2. In respect of an Insurance Company, assess the appropriateness of Reinsurance arrangements and risk Retention levels for each line of business having regard to the Company’s risk appetite, making recommendations to Senior Management and the Board of Directors in a form and at dates as prescribed by SAMA.
3. In respect of a Reinsurance Company, assess the appropriateness of Retrocession arrangements and risk Retention levels for each line of business having regard to the Company’s risk appetite, making recommendations to Senior Management and the Board of Directors in a form and at dates as prescribed by SAMA.
4. Coordinate with the Investment Committee and investment manager to provide recommendations to the Company’s Senior Management and Board of Directors regarding the Company’s investment policy and asset liability management strategy, keeping in view the nature and timing of Insurance Contract Assets and Liabilities and the availability of appropriate assets in a form and at dates as prescribed by SAMA.
Article 58
1. The Appointed Actuary of an Insurance Company shall submit a Reinsurance report to the Company’s Senior Management, Board of Directors and SAMA. The report shall be submitted in a form and at dates to be prescribed by SAMA’s instructions
2. This report shall assess the appropriateness of Reinsurance arrangements and risk Retention levels for each line of business having regard to the Company’s risk appetite, capital adequacy and the total exposure currently underwritten and expected to be underwritten in the following financial year and provide observations on risk Retention levels, considering:
a. Profit sharing mechanisms or variable commissions.
b. Loss sharing mechanisms.
c. Any caps on the Reinsurance Companies’ total exposure under Reinsurance treaties.
d. Any caps on the Reinsurance Companies’ exposure to single events, incidents or claims.
e. Any swing rates where Reinsurance premiums are adjusted based on the results of the Reinsurance.
f. The possible impacts of reinstatements or aggregate deductibles on excess of loss treaties.
g. How Reinsurance arrangements are expected to operate under stress scenarios.
3. The Appointed Actuary shall review and comment on the effectiveness of the Company’s procedures to assess whether or not any Reinsurance contracts transfer significant Insurance risk to the Reinsurance Company, particularly in conjunction with any side letters or other arrangements, and report accordingly.
Article 59
1. The Appointed Actuary of a Company that is a Reinsurance Company may be required to submit a Retrocession report to the Company’s Senior Management, Board of Directors and SAMA in a form and at dates to be specified by SAMA covering as a minimum the appropriateness of Retrocession arrangements and risk retention levels for each line of business having regard to the Company’s risk appetite, capital adequacy and the total exposure currently underwritten and expected to be underwritten in the following financial year and providing observations on the Reinsurance Company’s risk Retention levels.
2. The Appointed Actuary shall review and comment on the effectiveness of the Company’s procedures to assess whether or not any Reinsurance contracts issued or Retrocession arrangements entered into transfer significant Insurance risk, particularly in conjunction with any side letters or other arrangements, and report accordingly.
Article 60
1. The Appointed Actuary of a Company shall submit an investment and asset liability management report to the Company’s Senior Management, Board of Directors and SAMA in a form and at dates to be prescribed by SAMA.
2. This report shall assess the suitability of the Company’s investment policy and asset liability management strategy, having regard to the total exposure currently underwritten and expected to be underwritten in the following financial year, addressing the nature and timing of Insurance Contract Assets and Liabilities and the availability of appropriate assets, coordinating with the Investment Committee and investment manager for the purposes of its production.
The Appointed Actuary’s Role in Performing Experience Studies
Article 61
The Appointed Actuary shall carry out such experience studies as are prescribed by SAMA’s Instructions addressing, as a minimum, expense analysis and, for Companies transacting Protection and Savings Insurance, persistency, mortality experience and, where relevant, morbidity experience, reporting to SAMA in accordance with SAMA’s Instructions.
Article 62
The Appointed Actuary should report on expenses, drawing on experience to date and leading professional practice such as activitybased cost analysis, sufficient to support the assumptions and related Insurance Contract Assets and Liabilities in accordance with financial reporting standards applicable in the Kingdom which may, for example, include:
1. Premium deficiency analysis for all general Insurance products and short term Protection and Savings insurance.
2. Analysis of unallocated loss adjustment expenses.
3. Renewal expense assumptions.
4. Insurance acquisition cash flows.
5. Any provisions for expense overruns for Protection and Savings business. Such provisions may only be adopted for the first three years’ valuations after the Company commences writing Protection and Savings business except with prior statement of nonobjection from SAMA.
Article 63
The Appointed Actuary should analyze and report on the persistency rates of all long-term Protection and Savings products, analyzing the persistency and lapse experience of each separate distinct product type as compared with the assumptions previously made, in a form and at a frequency to be determined by way of SAMA’s Instructions.
Article 64
The Appointed Actuary should analyze and report on the mortality experience for all Protection and Savings products, analyzing the mortality experience of each separate distinct product type as compared with the assumptions previously made, in a form and at a frequency to be determined by way of SAMA’s Instructions.
Article 65
The Appointed Actuary should analyse and report on the morbidity experience for all Protection and Savings products where benefits, including waivers of premium, are determined based on morbidity experience, analysing the morbidity experience of each separate distinct product type as compared with the assumptions previously made, in a form and at a frequency to be determined by way of SAMA’s Instructions.
Non-Compliance
Article 66
Non-compliance with the requirements set forth in these Rules will be deemed a breach of the Law and its Implementing Regulation and licensing conditions or SAMA’s statement of non-objection and may subject Companies and/or Appointed Actuaries or Actuarial Services Providers to regulatory actions.
Article 67
In the case of non-compliance by the Appointed Actuary with the requirements set forth in the Law and its Implementing Regulation, these Rules, or the Actuarial Association’s professional code of conduct and technical standards of practice, the Company shall inform its Board of Directors and SAMA in this regard within 24 hours of becoming aware of the non-compliance, and provide SAMA with the details of actions taken within (10) working days from the date of discovering the violation.
Closing Provisions
Article 68
Any disputes or conflicts arising in respect of the contract between the Company and the Appointed Actuary or the Actuarial Service Provider, or in respect of the implementation of these Rules, are to be subject to the Laws and regulations of the Kingdom.
Appendix (1)
Provision No. Instructions of Establishing the Actuarial Function within the Re/Insurance Company
Taking into consideration Article (16) of the Actuarial Work Rules for Insurance and/or Reinsurance Companies, the Company shall establish an Actuarial Function commensurate with the scale and complexity of its business, within six months of the issuance the Rules, taking into account all of the following:
1 The actuarial function shall constitute of at least three (3) Saudi Actuaries within one year of the issuance of the Rules .
2 The Company shall appoint internal Qualified Actuary within two years of the date of issuance of the Rules.
3 The Company must appoint an internal Qualified Actuary who is Saudi within seven years of the issuance of the Rules.
4 The Actuarial Function shall be headed by a sufficiently experienced natural person employed by the Company to fulfil the role of Head of the Actuarial Function after obtaining SAMA’s statement of nonobjection.
5 The head of the Actuarial Function shall comply with minimum standards prescribed by SAMA.
6 The Head of the Actuarial Function shall report directly to the Chief Executive Officer of the Company.
7 The company must update its code of governance to reflect the role and responsibilities of the Actuarial Function.
8 The Board of Directors and Senior Management of the Company must provide the Actuarial Function with sufficient resources commensurate with the scale and complexity of the Company’s business, including sufficient human resources as well as access to information technology and other appropriate systems, training and professional development.
9 The Company shall issue a training and development policy for professional actuarial certifications, to ensure that Saudi Actuarial Candidates obtain the fellowship of an Actuarial Association within a reasonable period, and submit the policy to SAMA within six months of the issuance of these Rules.
10 The Company shall provide SAMA with an annual report on the Actuarial Function that includes as a minimum the followings:
a. The training and development policy referred to in Provision (9) above indicating what has been applied within the giving period.
b. Number of Actuaries and their experiences according to the classification of these Rules.
c. Expansion plan of the Actuarial Function in regard to employment for the next 5 years taking in consideration the scale and complexity of actuarial work of the Company.
d. Number of actuarial examinations taken and percentage of passes.
e. Knowledge transfer activities conducted by the Appointed Actuary within the given period.