INTERNATIONAL BEST PRACTICES IN ON-SITE INSPECTIONS OF INSURERS

Thomas E PowerSenior Manager, Emerging Market PracticeBearing Point

RATIONALE FOR ON-SITE INSPECTIONS

Virtually all regulatory authorities conduct on-site inspections

It differs from an independent audit in that it is addressed to the chief regulator;

applies accounting rules established by the regulator; and

determines financial condition (as opposed to merely reporting on the material fairness of insurer’s financial statements

RATIONALE FOR ON-SITE INSPECTIONS (contd..)

Also determines the insurer’s compliance with law

It is risk-based in that it also reports on the insurer’s ability to meet its obligations both presently and prospectively

Does not necessarily duplicate the work done by the auditors – it supplements the work and relies on it where prudent

The On-Site Inspection Process

Planning the Annual Inspection Program

Many countries have adopted regular cycles

Regular inspections and targeted and expedited inspections

Consultation with all departments in the agency

Coordination of some activities with the work of the independent auditors

The On-Site Inspection Process (contd..)

Planning for Individual companies

Determine the team

Planning meeting with all concerned divisions

Conduct a triage of risk (i.e. ranking the various items by priority)

Inform the company of the inspection date

Convene pre-inspection meeting with company

Procedures During the Inspection

Assignment and monitoring of team

Meetings with team for progress reports

Regular meetings with senior management

Documentation through detailed working papers

Security!

Regular reports to person in charge of inspections

Concluding the Inspection

The Report

Summarizing findings

Assuring complete documentation

Recommending any follow-up procedures

   

International Systems

Use of Independent or contract auditors under control of the supervisory authority

Scheduling of inspections only on an “as needed” basis

Mandatory regularly scheduled inspections

Inspection reports public or confidential

Opportunity for administrative hearings                         

Inspection Tools

Early Warning System

Reports of off-site inspections

Complaints

Software programs to speed procedures