1. SOFE CDS 2018 Indian Wells, CA
Risk Focused Analysis and Coordination – the relationship between the new Analysis process, Examinations and best practices in working together
Presenter:
B11 - Risk-Focused Analysis and Coordination—The Relationship Between the New RF Analysis
Process, RF Examinations and Best Practices in Working Together
Pat Gosselin, CFE • New Hampshire Department of Insurance
John Humphries, AES, CFE • Risk & Regulatory Consulting, LLC
Phil Schmoyer, AES, CFE • Baker Tilly Virchow Krause, LLP
The true deliverable of any examination is a thorough understanding of the company. To be effective, every
EIC must work closely with the assigned analyst and take the Department’s understanding to another level.
Pat Gosselin, Chief Financial Analyst
New Hampshire Insurance Department
John Humphries, Partner
Risk & Regulatory Consulting
Phil Schmoyer, Senior Manager
Baker Tilly

2. Do you have a headshot we can use?
Today’s Presenters
Do you have a headshot we can use?
Pat Gosselin,
Chief Financial Analyst
John Humphries, Partner
Phil Schmoyer, Senior Manager

3. Today’s Agenda
Understand the Risk-Focused Analysis process and how examiners can best support the analyst 1
Explore key opportunities to coordinate for both the examiners and analysts 2 3
Develop understanding of key documentation and uses cases for coordination

4. “Circle of Life” Arrows represent the flow of information
 Communication

5. Risk Focused Surveillance
Financial Condition Examiners Handbook - Preamble
“The primary purpose of a risk-focused examination is to review and evaluate an insurer’s business processes and controls(including the quality and reliability of corporate governance) to assist in assessing and monitoring its current financial condition and prospective solvency.”
So the real goal is to assist ( assist who? The Analyst!)
The goal of exams is to truly understand the company. Not just the balance sheet but insurers business processes and control, corporate governance) to assist (the analyst).
Our real “deliverable” is a deeper understanding of the Company. When we “deliver” this information- to the Analsyst – that is Communication!

6. Accreditation Requirements - Analysis
Communication of Relevant Information to/from Financial Analysis Staff (Review Team Guidelines Part B1, paragraph b.)
“The analyst's communication and collaboration with the financial examination staff before, during and at the conclusion of a financial examination”
“The analyst utilization and incorporation of pertinent information from the financial examination in conducting ongoing analysis.”
RTGs in the Accreditation Program Manual emphasis communication to/from the analyst. While the Analyst has a key role in maintaining and communicating information about a company, communicating with examiners and examinations is an important part.

7. Accreditation Requirements - Analysis
New Process Oriented RTG in 2018
Results of ongoing analysis procedures should be shared with the financial examiners to assist in examination planning through a coordination meeting.
An exchange alone, between analyst and examiner is not considered sufficient communication in planning an examination.
During the planning process of each examination, the analyst should meet (in person or via conference call) with the examiner to communicate areas of concern and specific issues to address during the examination.
To assist in communication, the analyst should provide a current copy of the Insurer Profile Summary (IPS) as well as other supporting analyst work papers and other documentation already on file at the department to communicate current or prospective concerns or observations and suggested procedures.
RTGs in the Accreditation Program Manual emphasis communication to/from the analyst. While the Analyst has a key role in maintaining and communicating information about a company, communicating with examiners and examinations is an important part.

8. Accreditation Requirements - Analysis
Prior Process Oriented RTG
The financial analyst should participate in a collaborative follow- up meeting or conference call at the end of the examination to discuss the following:
Examination results and/or findings
Insurer’s prioritization level
Ongoing supervisory plan and completed Summary Review Memorandum (SRM)
Re-assessment of branded risks as contained in the IPS
RTGs in the Accreditation Program Manual emphasis communication to/from the analyst. While the Analyst has a key role in maintaining and communicating information about a company, communicating with examiners and examinations is an important part.

9. Accreditation Requirements - Examiners
Communication of Relevant Information to/from Examination Staff (Review Team Guidelines Part B2, paragraph b.)
Results Oriented
Effectively communicate and coordinate
Specific requirement for communication and collaboration before, during and after the examination.
Utilize and incorporate pertinent info from financial analysis
RTGs in the Accreditation Program Manual emphasis communication to/from the analyst. While the Analyst has a key role in maintaining and communicating information about a company, communicating with examiners and examinations is an important part.

10. Accreditation Requirements - Examiners
Process Oriented
During Planning – Meet with analyst by in person or by conference call to discuss areas of concern and specific issues to address
exchange is not sufficient
Obtain IPS and supporting work to communicate concerns, observations and suggested procedures
RTGs in the Accreditation Program Manual emphasis communication to/from the analyst. While the Analyst has a key role in maintaining and communicating information about a company, communicating with examiners and examinations is an important part.

11. Accreditation Requirements - Examiners
Examiner should hold a collaborative follow-up meeting or conference call at the end of the examination to discuss the following:
Examination results and/or findings
Insurer’s prioritization level
Ongoing supervisory plan and completed Summary Review Memorandum (SRM)
Assessment of branded risks as contained in the IPS
RTGs in the Accreditation Program Manual emphasis communication to/from the analyst. While the Analyst has a key role in maintaining and communicating information about a company, communicating with examiners and examinations is an important part.

12. Accreditation Requirements - Examiners
Examiner should recommend follow-up for the financial analyst to perform in addressing concerns/issues identified .
Identified deliverable:
Report recommendations
Management letter comments
Prospective risks
SRM
RTGs in the Accreditation Program Manual emphasis communication to/from the analyst. While the Analyst has a key role in maintaining and communicating information about a company, communicating with examiners and examinations is an important part.

13. Better Team  Better Product
Common Sense
Better Team  Better Product
We only know a part of each Company’s story
We all have our strengths and weaknesses
There is an incredible strength in Teams but Teams only work if everyone works together
To take advantage of this strength - you have work as a well oiled machine – communication is oil that makes it work.
So, how can we can as examiners provide the right help and assistance to analyst.
Now to Pat…

14. Background on Risk Focused Analysis Development

15. Background of Risk-Focused Analysis
NAIC Risk-Focused Surveillance Working Group (RFSWG) Charges:
Continually review the effectiveness of risk-focused surveillance and develop enhancements to processes as necessary.
Oversee and monitor the development of enhancements to the financial analysis process that further incorporate risk-focused concepts and a review of prospective solvency risks.
Financial Analysis Working Group (FAHWG) Charges:
Provide ongoing maintenance and enhancements to the Financial Analysis Handbook and related applications for changes to the NAIC annual/quarterly financial statement blanks, and enhancements developed to assist in risk-focused analysis and monitoring the financial coordination of insurance companies and groups, as well as coordinate and analyze input received from other state regulators.
Coordinate with the Financial Examiners Handbook (E) Technical Group and the Risk-Focused Surveillance (E) Working Group, as appropriate, to develop and maintain guidance in order to provide effective solvency monitoring.

16. Development of Risk-Focused Analysis
Through regulator observations, NAIC Accreditation and Peer review findings, risk-focused analysis was developed to address and implement the following:
Consider prospective risks in the analysis process
Correlation of analysis and Insurer Profile Summary (IPS) nine-branded risk categories
Customize analysis by risk assessment to promote efficiencies for IPS
IPS provides the summary and conclusions of analysis work
Uses the same nine-branded risk categories as examinations for better coordination
Promotes better communication with other state departments and examinations
Re-write of the 2017 Financial Analysis Handbook on a Risk-Focused Approach

17. Areas of Coordination between Analysts and Examiners

18. Coordination between Examiners and Analyst should feel like a hand off
Planning
Fieldwork
Wrap-up / Reporting
Continued Analysis
Analyst
Examiners

19. Opportunities to Coordinate
Planning –
Examination team should meet with analysis, reviews files (YE and Qs) – and align branded risks
Improvement comes from Branded Risks being included within the new analysis process
Best practice to involve the Analyst on C-Level interviews (references in the analysis files) –
NH analysts summarize all C-Level interviews to maintain in files
**Exam efficiency – no need to type notes twice**

20. Opportunities to Coordinate
Wrap-up –
Analyst:
Sit in on the exit conference…provides a quick summary of observations and Company input / path forward
Get and use the SRM, which should be IPS based… allows for easy incorporation to the new analysis process and IPS
Use "workable" list of risks and incorporate into the analysis plan for the following year

21. Key Documents to Facilitate Coordination

22. Key Documents to Aide Coordination
Key documents and use cases
Insurer Profile Summary Report (IPSR) –
Key to analyst, starting point to examiners
Summary Review Memo (SRM) –
Key communication tool for examiners, starting point for continued analysis for analyst
Supervisory Plan – Examiner’s Handbook Exhibit U
Examination Report
Management Letter

23. Insurer Profile Summary (IPS)
Summary Information and Priority
Financial Snapshot
Branded Risk Assessments & Trends over time
Incorporation of Supervisory Plan

24. Summary Review Memo (SRM)
Summary Review Memo mirrors format of new Risk Assessment Worksheet regarding Branded Risk Categories
Other useful information for assessment of corporate governance and risk management, as well as recommendations made

25. Supervisory Plan Developed throughout analysis cycle
Influenced by examination outcomes
Integrated plan for supervision – should have collaborative development

26. Examination Report and Management Letter
Similar content across states
Provides most up-to- date information
Provides 5 year comparative analysis
Summary of observations & management actions needed
Concludes on past observations

27. Questions? Panel Discussion Pat Gosselin, Chief Financial Analyst
New Hampshire Insurance Department
John Humphries, Partner
Risk & Regulatory Consulting
Phil Schmoyer, Senior Manager
Baker Tilly
Panel Discussion