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TAS 200: Insurance v2.0
The FRC's purpose is to serve the public interest by setting high standards of corporate governance, reporting and audit and by holding to account those responsible for delivering them. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
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Introduction
1.1Terms in bold are defined in the Glossary of defined terms used in Technical Actuarial Standard 200, appended to this Standard.
Purpose
1.2Technical Actuarial Standard 200: Insurance (TAS 200) promotes high quality technical actuarial work in relation to insurance, supporting the reliability objective:
To allow the intended user to place a high degree of reliance on actuarial information, practitioners must ensure the actuarial information, including the communication of any inherent uncertainty, is relevant, based on transparent assumptions, complete and comprehensible.
Scope and compliance
TAS 200 is applicable to the following technical actuarial work in the geographic scope of FRC technical actuarial standards:
Valuation of insurance contract assets and liabilities
Technical actuarial work to support:
- the preparation of an insurer's balance sheet for prudential regulatory purposes 1.
- the preparation of an insurer's financial statements and the reporting of a parent company's interest in the insurer in its financial statements 1.
- a Lloyd's Statement of Actuarial Opinion.
- the confirmation required under the General Insurers' Technical Provisions (Appropriate Amount) Regulations 2009.
Prudential regulatory capital requirements and the Own Risk and Solvency Assessment
Technical actuarial work to support the calculation of an insurer's prudential regulatory capital requirements and technical actuarial work undertaken as part of its Own Risk and Solvency Assessment.
Insurance transformations
Technical actuarial work concerning:
- providing an opinion on schemes of arrangement.
- providing an opinion on Part VII transfers.
- supporting the role of policyholder advocate in an inherited estate reattribution.
- changes to the principles in the Principles and Practices of Financial Management.
- reporting on policyholder benefit reductions under section 376 of the Financial Services and Markets Act 2000.
Audit and assurance
Technical actuarial work to support the provision of an audit opinion on an insurer's financial statements and the reporting of a parent company's interest in the insurer in its financial statements.
Technical actuarial work to support the provision of an auditor's assurance opinion on an insurer's prudential regulatory reporting.
With-profits discretion
Technical actuarial work to support the exercise of discretion concerning with-profits life insurance policies.
Pricing frameworks
Technical actuarial work to support pricing frameworks.
Actuarial Function
Technical actuarial work to support the tasks of the Actuarial Function as set out in the prudential regulatory framework.
Insurance transactions
Technical actuarial work in connection with the merger, acquisition or disposal of insurance companies or portfolios or risk-transfer transactions.
1.3TAS 200 v2.0 applies to technical actuarial work in scope and completed on or after 1 January 2025.
1.4Work in the scope of TAS 200 is also in the scope of Technical Actuarial Standard 100: General Actuarial Standards (TAS 100). This Standard should, therefore, be read in conjunction with TAS 100. Each of the provisions in TAS 200 must be followed where they are relevant to the work.
1.5In applying judgement to the application of this Standard, it is important to be guided by the reliability objective.
1.6Practitioners are encouraged to have regard to the relevant guidance that accompanies the TASs and, in particular, the guidance on proportionality, to inform how they will comply with this Standard.
1.7TAS 200 must be applied by all members of the Institute and Faculty of Actuaries (IFoA) carrying out work in its scope. Wider adoption is encouraged and other relevant regulators and contracting parties may require entities and individuals who are not members of the IFOA to comply with this Standard.
1.8Actuarial information that is material must include a statement by the practitioner confirming compliance with TAS 100 and TAS 200. Any material caveat, qualification or limitation in that statement must be justified to the intended user. The evidence demonstrating compliance must be available to the intended user, if requested.
General Provisions
1.9This Standard consists of provisions which use defined terms 'must' and 'should'. The provisions which use the term 'must' set out mandatory requirements. The provisions which use the term 'should' set out regulatory expectations. Practitioners must have regard to these regulatory expectations; divergence may be acceptable but material deviations must be justified. The justification must demonstrate how compliance with the relevant provisions has been achieved despite not meeting regulatory expectations.
Provisions
1. Provisions for all work in scope of TAS 200
Risk identification
P1.1Where technical actuarial work relates to products that are within the scope of regulatory obligations relating to customer outcomes, practitioners should consider whether to make allowance for material factors arising from such obligations, in so far as the practitioner might reasonably be expected to know about these factors at the time of carrying out the work. Factors to consider may include planned or likely changes to premiums, charges or other terms and conditions and the impacts on future policyholder behaviour. Practitioners should include their considerations in their documentation.
Assumptions
P1.2Practitioners should consider whether assumptions material to the technical actuarial work are consistent with those used in technical actuarial work for other relevant purposes within the same entity, where the practitioner might reasonably be expected to have access to such information. Other relevant purposes may include business planning, pricing, reserving or capital modelling.
P1.3For material assumptions, where there is a consistent pattern of actual experience exceeding or falling short of that assumed in previous exercises for the same purpose, practitioners should consider whether the assumptions are appropriate and should include their considerations in their documentation.
Communications
P1.4Practitioners' communications should describe any material inconsistencies between material assumptions used in the technical actuarial work and those used in technical actuarial work for other relevant purposes within the same entity.
2. Valuation of insurance contract assets and liabilities
P2.1Where there was a previous exercise carried out for the same purpose, practitioners should assess whether there are material differences between the actual experience emerging since the previous exercise with that assumed in that previous exercise and identify the causes of those differences.
Communications
P2.2Where a practitioner has identified a material difference between the actual experience emerging since a previous exercise for the same purpose and that assumed in that previous exercise, the practitioners' communications should explain the difference and its causes.
3. Prudential regulatory capital requirements and the Own Risk and Solvency Assessment
P3.1Where technical actuarial work includes projections, practitioners should consider whether the projection period is sufficient to capture material time dependent risks.
Communications
P3.2Practitioners' communications for technical actuarial work that include stressed scenarios and use assumptions about the dependencies of risks should:
- explain any material differences between the balance sheet being stressed and that prepared for prudential regulatory purposes;
- describe any material changes to the management actions assumed in the stressed scenarios from those assumed in preparing the balance sheet for prudential regulatory purposes; and
- describe any material changes between assumptions about the dependencies used in the stressed scenarios and those used for prudential regulatory purposes and if there are no changes explain why.
P3.3Practitioners' communications for technical actuarial work that includes projections should describe how the projection period has been determined and how material time dependent risks have been allowed for.
4. Insurance transformations
P4.1Practitioners should identify the impact on the benefits of different classes of policyholders of adopting the insurance transformation, considering all groups of policyholders who may be materially affected by the transformation.
P4.2Unless set by the intended user, a third party or by regulation, assumptions used in technical actuarial work should take account of how the insurance transformation affects the relevant different parties. The extent to which assumptions have taken account of those effects should be described in the practitioner's documentation.
P4.3Practitioners should consider the impact of the insurance transformation on policyholders' benefits determined using credible alternative material assumptions.
P4.4Practitioners should consider whether the insurance transformation gives rise to material changes in the risks to the benefits of different classes of policyholders. Considerations may include assessing the significance of the changes using stresses and scenarios relevant to the nature and time horizon of the relevant risks. These may differ from those that are within the scope of those used to determine prudential capital requirements.
P4.5Practitioners should consider whether there are any material changes to the cash flows to policyholders resulting from the insurance transformation.
P4.6When planning and performing technical actuarial work, practitioners should consider whether circumstances exist that may cause data, models, reports or other information received to be insufficient, inaccurate or subject to bias.
Communications
P4.7Practitioners' communications should include sufficient actuarial information to enable intended users to understand how different classes of policyholders might be affected by an insurance transformation. The information provided should include:
- how the different classes of policyholders have been defined and whether the classes include groups of policyholders who are affected differently by the insurance transformation;
- the impact on the benefits of different classes of policyholders of adopting the insurance transformation and how those impacts might change when applying credible alternative material assumptions;
- any material changes in the risks to the benefits of the different classes of policyholders;
- any material changes to the cash flows to policyholders resulting from the insurance transformation; and
- any material advantages that might be gained or material disadvantages that might be incurred by any classes of policyholders.
5. Audit and assurance
P5.1Practitioners must plan and perform technical actuarial work with professional scepticism, recognising that circumstances may exist that cause the financial statements or prudential regulatory information to be materially misstated.
P5.2Practitioners must ensure that the exercise of professional scepticism is evident from the documentation.
P5.3Practitioners must include the initial scope of the technical actuarial work and the reasons for any variances from the initial scope in their documentation.
Communications
P5.4Practitioners' communications should state the nature and extent of any reliance on data prepared by another party and the conclusions of the technical actuarial work including any concerns on material deficiencies or limitations.
6. With-profits discretion
P6.1Practitioners advising or reporting on the exercise of discretion should identify the material effects of the exercise of discretion proposed or taken on policyholders' benefits, on amounts allocated to shareholders, if any, and on any with-profits estate affected.
Communications
P6.2Practitioners' communications advising or reporting on the exercise of discretion should describe the material effects of the exercise of discretion proposed or taken on policyholders' benefits, on amounts allocated to shareholders, if any, and on any with-profits estate affected.
P6.3Practitioners' communications for work that requires projecting cash flows under alternative scenarios should describe how any material changes in the assumptions about the exercise of discretion in the alternative scenarios considered are consistent with the fair treatment of the policyholders affected.
Glossary of defined terms used in TAS 200
Must Statements using the word 'must' set out mandatory requirements.
Should Statements using the word 'should' set out regulatory expectations and are intended to assist in compliance with mandatory requirements.
Deviation may be acceptable but material deviations will need to be justified. The justification must demonstrate how compliance with mandatory requirements has been achieved despite not meeting regulatory expectations.
Terms in bold in the text of this TAS 200 are used with the definitions set out below. These terms may also be used in the other TASs with the same meaning.
actuarial information The output of technical actuarial work, including output from a model designed for direct use by the intended user.
bias A disproportionate weight in favour of or against something.
communications Actuarial information which meets the reliability objective and is provided to an intended user to assist the intended user in making informed decisions.
data Facts or information usually collected from records or from experience or from observation. Examples include membership or policyholder data, claims data, asset and investment data, operating data (such as administrative or running costs), benefit definitions, and policy terms and conditions.
documentation Physical or digital material that provides evidence that serves as a record of facts, opinions, explanations of judgements, or other matters. It is not necessarily provided to an intended user.
financial statements Statements that are intended to give a true and fair view of an entity's financial position at the reporting date and profit or loss (or income and expenditure) for the reporting period.
geographic scope The intended geographic scope of the TASs is limited to technical actuarial work done in relation to the UK operations of entities, as well as to any overseas operations which report into the UK, within the context of UK law or regulation. This definition of scope applies regardless of the location or domicile of the person carrying out the work.
insurer An undertaking or group of undertakings effecting or carrying out contracts of insurance or reinsurance.
intended user A person or group of persons whose decisions communications are intended (at the time they are provided) to assist.
material Matters are material if they could, individually or collectively, influence the significant or relevant decisions that could be taken by an intended user. Assessing whether a matter is material is a matter for judgement and therefore subjective, requiring consideration of the objectives underpinning the technical actuarial work, the expectations and experience of the intended user and other considerations, such as the significance of resulting commercial or practical implications.
model A simplified representation of some aspect of the world.
The model produces a set of outputs from inputs in the form of data, assumptions and parameters. Inputs and outputs may be qualitative or quantitative.
The model is defined by a specification that describes the matters that should be represented, the inputs, and the relationships between the inputs and the resulting outputs.
The model is implemented through a set of mathematical formulae and algorithms (e.g. a computer program).
pension scheme An occupational or personal pension scheme established under UK legislation or other arrangement to pay pensions established under UK pensions legislation.
pricing framework The set of product pricing principles and the methodologies, assumptions and models implementing those principles that support an insurer's premium rates or product charges.
professional scepticism An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of evidence.
reliability objective To allow the intended user to place a high degree of reliance on actuarial information, practitioners must ensure the actuarial information, including the communication of any inherent uncertainty, is relevant, based on transparent assumptions, complete and comprehensible.
technical actuarial work Work performed for the intended user: (i) where the use of principles and/or techniques of actuarial science is central to the work and which involves the exercise of judgement; or (ii) which the intended user could reasonably regard as technical actuarial work by virtue of the manner of its communication.
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