Regulation on Insurance Actuaries

Based on Article 35, paragraph 1, sub-paragraph 1.1 of Law No. 03/L-209 on the Central Bank of the Republic of Kosovo (Official Gazette of the Republic of Kosovo, No. 77/16 August 2010), Article 4 paragraph 3 and Article 72 of Law 05/L-45 on Insurance (Official Gazette of the Republic of Kosovo, No. 38/24 December 2015), the Board of the Central Bank of the Republic of Kosovo, at the meeting held on 31 March 2016, approved

REGULATION ON INSURANCE ACTUARIES

Article 1
Scope of the Regulation

1. This Regulation defines the conditions, criteria, and requirements necessary to become an appointed and approved insurance actuary, to operate in Kosovo, as well as other reporting required by the Central Bank of the Republic of Kosovo (BQK).
2. The activity of an insurance actuary may be exercised by natural persons or legal persons (actuaries and actuarial companies) approved by the Central Bank of the Republic of Kosovo (hereinafter: BQK) in accordance with the provisions of this Regulation.
3. Actuaries defined in Article 2 may not carry out their operations as insurance actuaries before being appointed by the insurer and approved by the BQK.
4. Each insurance actuary shall be subject to the laws and regulations of Kosovo on insurance and shall be specifically supervised by the BQK.

Article 2
Definitions

1. All terms used in this Regulation have the same meaning as the terms defined in Article 3 of Law No. 05/L-045 on Insurance (hereinafter: Insurance Law), or according to the following definitions, for the purpose of this Regulation:
   a) "Insurance Actuary" means any person who has been professionally trained, has the appropriate training, and is qualified as an actuary or is registered as such in an institution or institutions professional recognized by the BQK. The insurance actuary may be a legal entity established with its center in the Republic of Kosovo to carry out insurance actuarial activities or a natural person who carries out insurance actuarial activities for insurers; b) "Appointed Actuary" means the qualified actuary appointed by the insurer to complete the report on the actuarial assessment of technical provisions and the summary of the actuary's opinion, actuarial calculations, and working papers; c) "Qualified Actuary" means the actuary approved by the BQK.
2. For the purposes of this Regulation, unless otherwise specified by separate provisions, the term insurer also includes the reinsurer.

Article 3
Requirements for Actuary Approval

1. For the purposes of this Regulation, actuarial assessments subject to this Regulation may be carried out in Kosovo only by actuaries appointed by the board of directors of the insurer and approved by the BQK. The BQK may approve an actuary to carry out actuarial assessments in Kosovo if they meet all the criteria in paragraph 2 of this Article.
2. The actuary must be fit and proper to hold the designated position of actuary for the insurer based on the following criteria:
   a) integrity, honesty, and commitment to fulfilling their duties;
   i. competence, professional skills, and sound judgment in fulfilling their duties;
   ii. independence so as not to have a negative impact on the interests of the insurer as a result of conflicts of interest that may arise during the performance of duties.
   iii. to have the professional qualifications defined through an actuarial scientific title or certificate issued by a university or recognized professional institution that certifies the successful completion of the full cycle of actuarial qualifications;
   b) it is preferred to be a member of any internationally recognized actuarial society or organization; c) to have experience in the field of actuarial sciences; d) to have professional knowledge in legislation, ethics, and best practices of the insurance market in Kosovo; e) in addition to the provisions defined above, the BQK evaluates the behavior and previous activities of the person in question, in professional and financial matters, and in particular will check if there is evidence showing that they have been or are:
   i. convicted by a final court decision for a criminal offense, with six (6) months or more of imprisonment;
   ii. involved or linked to any financial loss caused by dishonest, imprudent, or negligent actions, in relation to the performance of financial services and management of other commercial companies;
   iii. engagement in commercial business practices, including tax evasion, which the BQK considers as deceptive, inappropriate, or threatening practices in any way reflect the lack of personal values in the performance of financial services and other business operations.
   iv. to be registered in the Kosovo Business Registration Agency (if the actuary is not in an employment relationship with the insurer).
   v. to have no unpaid tax obligations on time.
3. The board of directors of each insurer must appoint an actuary approved by the BQK. This actuary will be appointed by the board of directors of the insurer. The insurer must notify the BQK in writing within 15 days of this appointment.
4. The BQK may set other rules regarding the requirements for professional training and assessment of technical knowledge, necessary to perform the duties of an approved actuary, and these must be in compliance with the requirements of recognized international actuarial associations or organizations.
5. The validity period of the BQK approval is three (3) years, with the right of renewal, upon presentation of evidence of continuous professional training, which must be no less than 30 hours within three years.
6. Actuaries wishing to be approved or re-approved by the BQK to carry out actuarial assessments in Kosovo must submit an application together with proof of payment of the necessary fee, determined by the BQK, and submit evidence that they meet all the requirements from paragraphs 2 and 5 of this Article.
7. The BQK's decision on approval or refusal of approval will be justified and made known in writing to the actuary or insurer, who applied on behalf of the actuary, within one (1) month from the date of completion of the application and documentation for approval as an authorized actuary.

Article 4
Register of Approved Insurance Actuaries
The BQK will maintain a public register on its website with all actuaries approved in Kosovo.

Article 5
Withdrawal of Actuary Approval

1. The BQK will withdraw the approval of an authorized actuary in the following cases:
   a) The BQK has found that the approval was obtained based on intentionally false statements; b) the approved actuary commits a serious violation of the law, regulations, other regulatory instruments, rules of the actuary profession, and code of ethics;
2. The BQK will inform the insurer, where the approved actuary performs actuarial services, of the withdrawal of approval for that actuary.
3. Supervision of approved actuaries is carried out by the BQK. The provisions of the articles of this Regulation concerning the supervision of insurers will apply appropriately also to the supervision of approved actuaries.
4. The BQK may suspend the approval of an actuary for a period of 1 to 3 years if they commit any violation of this Regulation, which is considered to have a material effect by the BQK.
5. The BQK may approve additional rules regarding the appointment, dismissal, and other matters related to approved actuaries.

Article 6
Change of Actuary
When an insurer or reinsurer intends to change its actuary, it must obtain prior written approval from the BQK.

Article 7
Professional Liability Insurance
Actuarial companies throughout the time of exercising their activity must have valid professional liability insurance to ensure their obligations to policyholders in case of violation of the provisions of their service agreement, up to a certain amount, which in any specific insured case cannot be less than 500,000 euros, or in all insured cases within the year cannot be less than 1,000,000 euros, or any other amount, which is considered reasonable by the BQK.

Article 8
Additional Reporting

1. Actuarial companies will report to the BQK the facts and circumstances as follows:
   a) registration of any change in their notes that are registered in the Business Register; b) list of any change in the shareholders of the actuary, or holding companies; c) any appointment or dismissal of members of the board of directors; d) the specified time of commencement of operations, restoration, closure, or temporary suspension of the actuary's activity or any other change in the types of activities carried out by the actuary; e) additional information or changes in information for persons or related persons or parties and changes in this information; f) financial statements including income statements, balance sheets, and cash flow statements if requested; g) any additional information which the BQK considers important.

Article 9
Statement on Summary of Actuary's Opinion and Actuarial Report

1. The annual summary of the actuarial report together with the actuary's opinion as referred to in Articles 10, 11, and 13 below will be submitted to the Board of Directors of the insurer, and the insurer will offer this to the BQK.
2. The Board of Directors of the insurer will take measures to regulate activity in accordance with the report of the appointed actuary as referred to in Article 10 and Article 11 of this Regulation. If the Board of Directors of the insurer fails to take the necessary measures in accordance with the actuarial report, the appointed actuary must notify the BQK immediately.
3. The BQK may set additional requirements regarding the fulfillment of criteria defined in this Article. In addition to submitting the quarterly and annual report on the assessment of technical provisions, insurers will be obliged to submit to the BQK on an annual basis the actuary's opinion on the assessment and adequacy of technical provisions for insurers.
4. The summary of the actuary's opinion submitted by the insurer to the BQK will become public information, and the BQK has the authority to publish the document, which can be read on its official website.
5. Actuarial working documents provided as support for the actuary's opinion statement and any other information provided by the insurer to the BQK in relation to the actuary's opinion statement issued under this Article is confidential; however, nothing in this Article limits the authority of the BQK to submit documents to any professional organization that disciplines actuaries and is recognized by the BQK, provided the material is requested for professional disciplinary proceedings and the professional organization has created satisfactory procedures for the BQK in maintaining the confidentiality of documents.

Article 10
Non-Life Insurance – Detailed Content of the Actuarial Report Statement

1. The actuary's report statement for non-life insurance obligations must contain at least the following information:
   a) their assessment of whether the insurer keeps proper notes for the calculation of technical provisions; b) tables with notes on technical provisions, divided by insurance classes and types of technical provisions provided in current insurance legislation; c) general principles and methods used for the assessment of each class of insurance and each category of insurance contracts, including specific references to these as follows:
   i. basis for determining provisions for unearned premiums;
   ii. basis for determining provisions for outstanding risk;
   iii. basis for determining provisions for unpaid losses and losses incurred but not reported (IBNR);
   iv. basis for determining other technical provisions;
   d) if there has been any considered change in actuarial estimates and/or methods from those used previously, then this change must be described; e) results from the Liability Adequacy Test (LAT) by insurance classes; f) results for the development run-off of claims for one (1) year and for two (2) years, by insurance classes.
2. Before commenting on the reinsurer's part in technical provisions, the actuary must obtain information from management on any collection problems and review notes given for reinsurers by any recognized rating institution.
3. For insurance contracts ceded to reinsurers by insurance classes:
   a) the aggregate of premiums paid by the insurer under the reinsurance contract in the year calculated with which the actuary's report is linked, if appropriate, and the aggregate sum deposited on the valuation date under any agreement for the return of deposits; b) the reinsurance part of technical provisions related to premiums and losses by each class of insurance.
4. For each case of reinsurance agreement where the insurer is the cedant and under which reinsurance enters into force on the valuation date, for each class of business:
   a) names of reinsurers with whom the insurer has reached reinsurance agreements; b) if the insurer and reinsurer are related and if so how they are related; c) an indicator of the nature and extent of coverage given under the reinsurance agreement; d) premiums payable by the insurer under the reinsurance agreement in the calculation period to which the valuation report refers; e) the sum deposited on the valuation date in relation to the reinsurance agreement under any agreement for the return of deposits; f) the reinsurance part of technical provisions related to premiums and losses by each class of insurance.
5. To assess whether the invested assets of the insurer covering technical provisions are in compliance with current legislation in force for insurance. To show in detail the list of those invested assets.
6. To assess whether the minimum capital of the insurer and the solvency margin are in compliance with current legislation in force for insurance. To show the calculated results of the solvency margin and assets covering the required capital.

Article 11
Life Insurance – Detailed Content of the Actuarial Report Statement

1. The actuary's report statement for life insurance obligations for which mathematical provisions are part of them, must contain at least the following information:
   a) their assessment of whether the insurer keeps proper notes for the calculation of technical provisions; b) full description of all rights and obligations of each category of insurance contracts taken in insurance by the insurer, including the premium rate, guarantees, and options or any remaining obligation from previous contracts. c) general principles and adopted methods of assessment, following:
   i. if negative provisions have emerged and if all necessary steps have been taken to ensure they are returned to zero;
   ii. if provisions have been made for bonuses, if so to what extent;
   iii. basis of provisions made for any mismatch between the nature and terms of held assets and the assessed liability;
   iv. where the net premium method is used for calculating mathematical provisions, if and to what extent the method in question has been modified;
   v. basis of provisions separated for all guarantees and options defined by policy conditions.
   d) interest rates, mortality tables used in the calculation of premiums and in the assessment of provisions arising from different categories of life insurance contracts. e) for all life insurance contracts, except contracts where the investment risk is borne by the insured:
   i. proportion of gross premiums destined for expenses and profit for each category of contracts;
   ii. methods through which the provision is separated for expenses after premiums have ceased or where there are no future premiums payable;
   f) in relation to all types of contracts where the investment risk is borne by the insured:
   i. all assumptions made during the assessment of such insurance liabilities;
   ii. where no explicit provisions have been separated to cover future operational expenses of the insurer, details on the basis used in the testing of the sufficiency of provisions;
   g) in relation to insurance contracts that give the policyholder the right to participate in profit:
   i. account of income for assets covering mathematical provisions where the right to take part in profit depends on the performance of assets covering mathematical provisions.
   ii. principal and method applied in the distribution of profit, increase and decrease in the value of assets brought to account; expenses and any tax on assets covering mathematical provisions.
   h) if there is any reference to principles on which the distribution of profit is made between policyholders and shareholders or description of these principles. i) details on bonuses separated in each category of contracts, describing the basis of calculation and circumstances and form in which these bonuses are payable. j) showing results from the Liability Adequacy Test (LAT) by types of contracts;
2. Separate calculations of technical provisions for additional insurance made by life insurers, which specifically means, insurance against personal injury including disability for work, insurance against death caused by an accident, and insurance against disability caused by an accident or illness, where these different types of insurance are made as an addition to life insurance.
3. For insurance contracts ceded to reinsurers by insurance classes:
   a) the total (aggregate) of premiums paid by the insurer under the reinsurance contract in the year calculated in which the actuary's report is linked, if appropriate, and the total sum of the amount deposited on the valuation date under any agreement for bank deposits; b) the reinsurance part of technical provisions related to premiums and losses by each class of insurance.
4. For each reinsurance agreement, where the insurer is the cedant and under which reinsurance is in force on the valuation date, for each class of insurance:
   a) names of reinsurers with whom the insurer has reached reinsurance agreements; b) if the insurer and reinsurer are related in any way and if so how they are related; c) showing the nature and extent of coverage offered under the reinsurance agreement; d) premiums payable by the insurer under the reinsurance agreement in the calculation period to which the valuation report refers; e) value deposited on the valuation date in relation to the reinsurance agreement under any agreement for the return of deposits; f) the reinsurance part of technical provisions related to premiums and losses by each class of insurance.
5. To assess whether the invested assets of the insurer covering technical provisions are in compliance with current regulation for investment of assets covering technical and mathematical provisions, and to list in detail the list of these invested assets covering technical provisions.
6. To assess whether the minimum capital and solvency margin of the insurer are in compliance with current regulation for minimum capital and solvency. Listing the calculated results for the solvency margin and assets covering the required capital.

Article 12
Other Matters Related to the Summary of Actuary's Opinion and Actuarial Report Statement

1. The actuarial opinion must include assurance that the actuarial report and actuarial working documents supporting the actuarial opinion will be kept with the insurer and will be available for examination by the BQK for up to seven (7) years from the date of issuance of the report. The report must be kept confidential and not disclosed to the public.
2. The actuarial report must be consistent with documentation and disclosure requirements according to accepted actuarial standards and principles. The actuarial report must contain descriptive and technical components. The descriptive component must provide sufficient details to clearly explain to the insurer's management, board of directors, regulator, or other authorities, the findings, recommendations, and conclusions, as well as their importance. The technical component must provide sufficient documentation and disclosure for any other actuary working in the same field to assess the work done. This technical component must show analyses from basic data, e.g., loss triangles, to the conclusion.
3. The report must also include:
   a) description of the relationship of the appointed actuary with the insurer, with clear presentation of the role of the actuary in advising the board of directors and/or management regarding carried provisions. The report must identify and when the appointed actuary presents the analyses to the Board of Directors and when valid, to officials of the insurer responsible for determining carried provisions. b) statement that the actuary has reconciled the data with the current annual financial statement of the insurer. In other words, their examination has included such reviews of actuarial estimates and methods used and such tests of calculations as they have deemed necessary. c) statement from the actuary if it is appropriate "in forming my opinion on losses and loss provisions, I have relied on data prepared by _______________(name, affiliation, and relationship with the insurer). I have assessed that data for reasonableness and consistency". d) if the actuary has used the work of another actuary, he must identify the other actuary by name and also identify the connections of the latter with the insurer.
4. Insurers required to provide an actuarial opinion must request their appointed actuary to notify the Board of Directors or audit committee in writing within five (5) working days after any determination by the appointed actuary that the opinion submitted to the BQK was in error as a result of reliance on data and other information (except estimates) which, as of the balance sheet date, were factually incorrect data. The opinion will be considered in error if the opinion would not have been issued or would have been materially different if accurate data or information had been used. The opinion will not be considered in error if it would have been materially different or would not have been published only because of data or information related to events after the balance sheet date or because current results differ from those projected.
5. Notification will be required for any such determination made between the issuance of