2005 Arizona Revised Statutes - Revised Statutes §20-696.05  Statement of actuarial opinion based on an asset adequacy analysis

A. The statement of actuarial opinion required by this section shall include all of the following:

1. An opening paragraph that identifies the appointed actuary and the actuary's qualifications. This paragraph shall include the following information:

(a) The actuary's relationship to the company.

(b) The actuary's name, address and firm affiliation.

(c) The actuary's membership status in the American academy of actuaries.

(d) Identification of who appointed the actuary and whether the actuary was appointed as a company actuary or a consulting actuary, the scope of the appointment and the date the appointment occurred.

(e) The actuary's familiarity and compliance with the standards of the American academy of actuaries.

2. A scope paragraph that identifies the subject on which an opinion is to be expressed and that describes the scope of the appointed actuary's work, including a table of reserves and liabilities that delineates the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis, and that identifies those reserves and related actuarial items that have not been analyzed for asset adequacy. The scope paragraph shall include the following information:

(a) If the actuary has examined the actuarial assumptions and actuarial methods used to determine the reserves and related actuarial items of the annual statement on which the actuarial opinion is based.

(b) The specific reserves and related actuarial items that were subjected to asset adequacy analysis, including the formula reserves, additional actuarial reserves, other amounts included pursuant to applicable actuarial standards and the sum of these items, and the applicable analysis method employed to determine these items for the following annual statement entries:

(i) All applicable items from the aggregate reserve for life policies and contracts exhibit to the annual statement, consisting of entries for life insurance, annuities, supplementary contracts involving life contingencies, accidental death benefit, disability-active, disability-disabled, miscellaneous and a total of these items.

(ii) All applicable items contained on the aggregate reserve for accident and health policies exhibit of the annual statement, including active life reserve and claim reserve and a total for these items.

(iii) All applicable items from the deposit funds and other liabilities without life or disability contingencies exhibit from the annual statement, including premiums and other deposit funds, policyholder premiums, guaranteed interest contracts, other contract deposit funds, supplementary contracts not involving life contingencies, dividend and coupon accumulations and a total for these items.

(iv) All applicable items from the policy and contract claims exhibit from the annual statement, including life and health and a total for these items.

(v) Separate account information from the annual statement.

(vi) Total reserves from the annual statement.

(vii) The interest maintenance reserve from the annual statement.

(viii) The allocated amount for the asset valuation reserve from the annual statement.

3. A reliance paragraph that describes each area in which the appointed actuary who issues the opinion pursuant to this section has relied on others to develop data, procedures or assumptions and that includes a statement from each person on whom reliance has been placed. The reliance portion of the actuarial opinion shall indicate the extent to which the actuary has personally, or in reliance on other specifically identified individuals, examined and tested the underlying records of the company on which the actuary bases the actuarial opinion. The reliance paragraph shall include the following information:

(a) The identity of and a verification from each person on whom reliance has been placed to prepare the opinion with respect to the specific annual statement entries and related reserve and related actuarial items, listings and summaries of policies in force or asset records prepared by the company or a third party, and the specific items relied on that were prepared by a person other than the actuary.

(b) The underlying asset and liability records, actuarial assumptions and actuarial methods examined by the actuary including a description of each test of the actuarial calculations considered necessary by the actuary.

4. An opinion paragraph that expresses the appointed actuary's actuarial opinion as required by section 20-510. The opinion shall confirm that the actuarial opinion prepared pursuant to this section complies with subsection B of this section. The opinion shall state if amounts that are carried in the balance sheet of the annual statement on which the actuary bases the actuarial opinion:

(a) Are computed according to presently accepted actuarial standards.

(b) Are based on actuarial assumptions that produce reserves that are greater than or equal to the company's contractual obligations regarding reserve basis and method and are consistent with all other contract provisions.

(c) Are in compliance with this title and the laws of the company's domiciliary jurisdiction.

(d) Are computed using actuarial assumptions consistent with those used in the previous year's annual statement filing, with any exceptions specifically identified and explained.

(e) Include a provision for all actuarial reserves and related statement items that must be established.

(f) Are based on the applicable standards of the American academy of actuaries.

(g) If the reserve and related actuarial items and the assets of the company provide adequate cash flows to satisfy the contractual obligations and related expenses of the company.

(h) Whether unanticipated events that occur after the date of the opinion have been considered in the issuance of the opinion.

B. All actuarial methods, considerations and analysis that are used in forming actuarial opinions prescribed by this section shall comply with standards adopted by order of the director. In establishing standards, the director shall consider the applicable standards of the American academy of actuaries.

C. If the appointed actuary is unable to form an opinion, the appointed actuary shall refuse to issue a statement of actuarial opinion. If the appointed actuary's opinion is adverse or qualified, the appointed actuary shall issue an adverse or qualified actuarial opinion that explicitly explains the reasons for the opinion.

D. If the appointed actuary does not express an opinion regarding the accuracy and completeness of the listings and summaries of policies in force, or if another person certifies the accuracy and completeness of the listings and summaries of policies in force pursuant to this section, the company officer or accounting firm that prepared the underlying data shall sign and attach a statement to the opinion indicating:

1. The name, address and telephone number of the individual signing the statement.

2. An affirmation regarding the accuracy of the listings and summaries of policies and contracts in force as of the annual statement date on which the actuarial opinion is based, including the name of the individual who prepared or directed the preparation of the listings and summaries.

3. The extent to which the listings and summaries are believed to be substantially accurate and complete.

E. Each company that files with the director an actuarial opinion prepared pursuant to this section shall obtain from the appointed actuary who prepared the actuarial opinion a memorandum prepared pursuant to section 20-696.06.