08 May 2025
The year 2024 was the fifth
consecutive year of insurance companies submitting actuarial reports under the
Actuarial Work Rules (AWR) issued in March 2020. The primary objective of these
Rules is to enhance the role and responsibilities of actuaries in the insurance
sector in order to facilitate informed decision-making by management and to
provide greater technical support to the business as the market sophistication
continues to grow in the Kingdom.
Under the above Rules, an
Appointed Actuary is obligated to carry out technical pricing of risks, at
least annually and more frequently if business environment so demands, and
report to the Senior Management, Board of Directors and the Insurance Authority
(IA) the outcome of those exercises. The pricing exercises are required to be
carried out for Health, Motor and Protection & Savings insurance at a
minimum; the IA (or the Company management) may also require the Appointed
Actuary to carry out a similar exercise for other lines of business.
Depending upon the appropriateness
of the assumptions used, range of rating factors considered, allowance made for
any regulatory changes, and credibility assigned to a client’s own claim
experience, the competitive position of an insurance company is likely to be
significantly dependent on the Appointed Actuary’s recommended technical
prices.
The regulations also give
discretion to a Company management to deviate from the technical prices
recommended by its Appointed Actuary, provided there are adequate controls in
place in the form of i) an underwriting authority matrix that specifies the
deviation limit by role, ii) a requirement for the underwriter to document
justification for deviation from the technical rate, and iii) quarterly
reporting by the Appointed Actuary to the Board of Directors on the expected
financial impact of deviating from the technical prices in the form of Pricing
Adequacy Reports for Health and Motor lines of business.
This document encompasses the IA’s observations from its review of the
following actuarial pricing and pricing adequacy reports:
Health Actuarial Pricing Report (pages 3-17)
Motor Actuarial Pricing Report (pages 18-30)
Protection and Savings Actuarial Pricing Report (pages 31-40)
Health and Motor Pricing Adequacy Report (pages 41–48)
A number of important
observations emerged from our review. We are sharing these observations with
the Company’s management together with our expectations in respect of those
observations, in anticipation that management will consider each of those
observations and IA expectations diligently, internal discussions will be held
at the Board of Directors’ level and with all relevant functions, and
appropriate actions will be taken by management.
Furthermore, similar to last year, a separate brief document accompanies this letter that summarizes the IA’s expectations
regarding actuarial pricing and pricing adequacy exercises going forward.