Insurance Liability Valuation Report

60. An Approved Actuary must prepare an ILVR on an annual basis and provide that ILVR to the insurer within the time required by paragraph 28.[34] The ILVR must be addressed to the Board of the insurer and provide the Approved Actuary’s advice in respect of the value of the insurer’s insurance liabilities, determined in accordance with this Prudential Standard. In preparing an ILVR, an Approved Actuary must have regard to professional standards issued by the Institute of Actuaries of Australia, to the extent that they are not inconsistent with the requirements of this Prudential Standard.

61. The ILVR must, in respect of each class of business underwritten by the insurer, provide details (or abbreviated details for classes of business that are not material) of the following matters:

(a) the value of insurance liabilities determined in accordance with this Prudential Standard;

(b) assumptions used in the valuation process, including the extent to which the assumptions used are based on the experience of the insurer;

(c) availability and appropriateness of the data;

(d) significant aspects of recent experience;

(e) the methodologies used to model the central estimates of outstanding claims liabilities and premiums liabilities;

(f) an indication of the uncertainty in the central estimates, including statistics such as the standard deviation;

(g) the sensitivity analyses undertaken;

(h) a description of probability distributions and parameters, or approaches adopted to estimate uncertainty if these are not specifically determined; and

(i) risk margins that relate to the inherent uncertainty in the central estimate values for outstanding claims liabilities and premiums liabilities.

Further detail on the measurement and reporting of insurance liabilities is contained in Attachment A.

62. The Approved Actuary must, at least annually, reassess the appropriateness of the assumptions and valuation methods used to determine the insurance liabilities of the insurer. Where a change in assumptions or method is made, the effects of that change on the value of the insurance liabilities must emerge in the current calculation period and must not be spread over future calculation periods. The effects must be disclosed in the ILVR.

63. The ILVR must provide sufficient information in relation to the assumptions and methods used for the valuation of liabilities so that another actuary reading the ILVR will be able to obtain a sound understanding of the valuation process and results, any inherent limitations in the process and results and the key risks pertaining to the insurance liabilities of the portfolio. An Approved Actuary must ensure that results are not presented in a way that gives the impression of greater reliability than is actually the case. This particularly applies in situations where materially different results could reasonably be justified.