SAMA Actuarial Work Regulation for Insurance
The Saudi Arabian Monetary Authority (SAMA) announced the issuance of the Actuarial Work Regulation (the Rules) for Insurance on 1 March 2020. This comes after SAMA called for views on the draft regulation in November 2019, and it replaces the previous Regulations for Actuarial Acts of Insurance and/or Reinsurance Companies.
SAMA's main aim for this update is to " encourage the growth of prosperous and high-performing actuarial profession for their effective contribution towards a financially strong and thriving insurance industry" in the Kingdom of Saudi Arabia. They hope that this regulation may help develop the actuarial profession as a rewarding career opportunity for young Saudi nationals.
First, the Rules state that any person seeking to act as an actuary or provide actuarial services must obtain a prior statement of non-objection from SAMA. There are also certain compliance measures that must be adhered to, including establishing written internal controls and procedures to ensure and monitor compliance with the Rules.
The Rules establish requirements and procedures for companies to appoint and terminate their "Appointed Actuary" (a qualified actuary appointed by a company), and provide minimum requirements for the actuarial function within companies. Further, there is an ongoing obligation for a company to review each year whether their Appointed Actuary remains a fit and proper person and has no conflicts of interest to continue in their role.
The roles and responsibilities of a company's Appointed Actuary are defined in the Rules, and these include:
- performing a profit test of the adequacy of premium rates;
- advising on the terms and conditions of insurance policies;
- determining the adequacy of insurance contract assets and liabilities; and
- advising on the allocation of surplus, profits or bonuses to with-profits protection and savings insurance policyholders.
The Rules apply certain obligations on the board of directors and senior management of companies to ensure that the Appointed Actuary can carry out their responsibilities without delay. Essentially, these compel management to provide the Appointed Actuary with all of the relevant information required to undertake their analyses. If they are unable to obtain any information that they reasonably require, then the Appointed Actuary can report the matter to SAMA if appropriate action is not taken within ten working days of the matter being reported to the board of directors.
With regard to reporting, the Rules set out that each actuarial report produced by the Appointed Actuary should be clear, comprehensive and presented in a manner which adequately explains issues and developments that have material implications for the company, or the interests of policyholders/beneficiaries. The Rules state that a qualified actuary should be able to follow the report and come to a consistent conclusion, and the Rules lay out specifically what each report should contain as a minimum.
Finally, the Rules also consider the Appointed Actuary's role in relation to managing the company's data and confidentiality, reserving, pricing and pricing adequacy, assessing the company's solvency and capital, risk management, and experience studies.
The updated Rules seek to enhance policyholder protection and promote an insurance sector capable of responding to evolving customer needs and supporting continued economic expansion and stability in the Kingdom. SAMA have clearly highlighted the role of an actuary within a company and these Rules highlight its importance to the Kingdom's insurance sector going forward.
If you would like to discuss any of the above in further detail, please do not hesitate to contact the authors of this briefing or your usual HFW contact.
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