Actuarial function

The actuarial function (VMF) is a function in an insurance company that is required under Solvency II (Article 48 of the Solvency II Directive) and in Section 31 of the Insurance Supervision Act. It is one of the four key functions defined in the explanations for Section 24 VAG.

Description and organizational integration

The VMF is required for all insurance and reinsurance companies and for insurance groups (for groups throughout the EEA in Section 246 of the Solvency II Directive or in Germany in Section 275 VAG from January 1, 2016). The requirements of the directive apply equally to all insurance and reinsurance companies in the EEA.

The VMF is to be distinguished from the responsible actuary in Germany according to §§ 141, 156, 161 and 162 VAG. In contrast to the responsible actuary, the VMF is not required to be carried out by a single person. Distribution to several people who can also belong to different organizational units in the company, or outsourcing is permitted. In Germany, however, the Federal Financial Supervisory Authority (BaFin) attaches great importance to having a contact person in the company or for the insurance group for the VMF. If the VMF is outsourced, an outsourcing officer is required.

The VMF is one of the key functions to be filled under supervisory law, alongside internal auditing , the compliance function and the risk controlling function. In terms of regulation, independence is therefore also expected from the VMF. As a result, the VMF should not be responsible, for example, for underwriting insurance risks or for securities trading. There should also be no conflicts of interest with the other key regulatory functions. According to the Solvency II Directive, however, it is expressly permitted that in certain cases, e.g. B. in medium or small insurance companies, with special providers and depending on the nature, size and complexity of the risks, the above-mentioned functions can be held responsible in personal union. Potential conflicts must be appropriately countered with appropriate accompanying measures. A specific organizational form for the design of the VMF is not required by the regulations. It is required that an effective VMF exists, which is independent of the risk taking and has the skills to coordinate calculations, actuarial methodological competence, reliability, judgment and experience in dealing with the complexity of risks.

Tasks according to Article 48 of the Solvency II Directive with regard to the solvency balance sheet are:

1. Coordinating the calculation of technical provisions
2. Ensuring the appropriateness of the methods and basic models used and the assumptions made when calculating the technical provisions
3. Assessment of the sufficiency and quality of the data used in the calculation of the technical provisions
4. Comparison of the best estimates with empirical values
5. Informing the administrative, management or supervisory body about the reliability and appropriateness of the calculation of the technical provisions
6. Supervision of the calculation of the technical provisions in the cases mentioned in Article 82 of the Solvency II Directive (quality of the data and application of approximate values ​​including individual case analyzes for the technical provisions)
7. Formulation of a statement on the general subscription and acceptance policy
8. Formulation of an opinion on the adequacy of the reinsurance agreements
9. Contribution to the effective implementation of the risk management system named in Article 44 of the Solvency II Directive (risk management), in particular with regard to the creation of risk models that are used in the calculation of the capital requirements within the meaning of Chapter VI Sections 4 and 5 of the Solvency II Directive ( Solvency capital requirements and minimum capital requirements) and to the assessment mentioned in Article 45 of the Solvency II Directive (company's own risk and solvency assessment)

Tasks related to the coordination of the calculation of the technical provisions in the solvency balance are

1. Use of methods and processes that assess the adequacy of the technical provisions as well as assess whether the calculations are in accordance with the requirements of the Solvency II Directive
2. Assessment and evaluation of the uncertainty associated with the calculation of the technical provisions
3. Ensuring that inadequacies in the data used in the calculation are adequately dealt with
4. Ensuring that the most appropriate approximation is chosen to determine the best estimate
5. Ensuring that the portfolio is appropriately divided into homogeneous risk groups
6. Ensuring that financial market and other generally accessible data - if relevant - are included in the valuation of the technical provisions
7. Carrying out examinations for deviations from one year to the next in the valuation of the technical provisions. If there are significant deviations, these must be explained
8. Ensure that insurance and reinsurance contracts are appropriately examined for options and guarantees contained in these products
9. Assessment of whether the methods and assumptions for calculating the technical provisions for the individual lines of business are appropriate, taking into account the business transaction and the data available in the company
10. Assessment of whether IT systems that are used to calculate the actuarial provisions sufficiently support the actuarial and statistical processes
11. Compare the best estimates with the empirical values ​​and assess whether the quality of the previous estimates is reasonable and use this knowledge to improve the current calculations. This analysis includes a comparison of observed values ​​with the estimated parameters and values ​​used in calculating the best estimate. From this, conclusions should be drawn about the appropriateness, accuracy and completeness of the data and assumptions as well as about the methods used in the calculation
12. Transmission of information for the calculation of the technical provisions to the Board of Directors, which contains at least a reasoned analysis of the reliability and adequacy of the calculation and shows possible sources and dimensions of uncertainties in the calculation. This analysis should be supported by a sensitivity analysis, which shows sensitivities with regard to the essential underlying risks that are covered by the technical provisions. The VMF is designed to identify and explain any possible concerns about the adequacy of the technical provisions.

The statement on the subscription and acceptance policy, with an assessment of whether the premiums earned are sufficient to cover future damage and costs, should contain at least the following aspects:

• represent the underlying risks (particularly "underwriting" risks)
• discuss the influence of options and guarantees in primary insurance and reinsurance premiums
• address the appropriateness of the contributions
• the influence of inflation
• the influence of legal risk
• the influences of portfolio changes
• the influences of control functions (such as bonus-malus systems)
• the influences of anti-selection

The statement on reinsurance should include an analysis of the adequacy of the reinsurance with regard to the following aspects:

• the company's risk profile
• the underwriting policy
• the solvency of reinsurance partners ("credit standing")
• the expected reinsurance coverage under stress scenarios if the underwriting guideline is observed
• the appropriateness of the calculation of payments from reinsurance contracts and reinsurance special purpose vehicles

As part of the duty to inform the management, the VMF must prepare a report to the management at least once a year. This report should document all the tasks performed by the VMF and their results, as well as point out possible inadequacies and recommendations in this regard.

Qualification requirements

In order to perform the actuarial function, it should be filled by persons who have knowledge of insurance and financial mathematics appropriate to the nature, scope and complexity of the risks associated with the activity of the insurance or reinsurance company, and who can present their relevant experience with regard to applicable professional and other standards.

history

The deregulation of the German insurance market with the 3rd EC Directive on July 1, 1994 resulted in a change in the area of ​​responsibility of actuaries. Up until this point in time, all the mathematical principles of life and health insurance mathematics and accident insurance with premium refunds were subject to approval by the Federal Insurance Supervisory Office. In this context, the responsible actuary was introduced , who has a focus of his area of ​​responsibility on customer protection by checking and confirming the actuarial reserve in the balance sheet according to the German Commercial Code. With a view to the standardization of insurance supervision in Europe and in the course of the capital market crises since the end of the 1990s, the VMF was introduced across Europe.

literature

Deutsche Aktuarvereinigung eV (Ed.): Compendium on the actuarial function under Solvency II , Cologne 2015

Individual evidence

1. ↑ Preparation for Solvency II: Actuarial function. (No longer available online.) In: BaFin. Archived from the original on July 6, 2016 ; Retrieved July 6, 2016 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.  
2. ↑ § 31 VAG actuarial function - dejure.org. In: dejure.org. Retrieved July 6, 2016 . 
3. ↑ Printed matter 18/2956 of the German Bundestag from October 22, 2014; Page 240 3. Accessed July 6, 2016 . 
4. ↑ Preparation for Solvency II: Actuarial function. (No longer available online.) In: BaFin. Archived from the original on July 6, 2016 ; Retrieved July 6, 2016 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.  
5. ↑ Preparation for Solvency II: Actuarial function. (No longer available online.) In: BaFin. Archived from the original on July 6, 2016 ; Retrieved July 11, 2016 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.