Examination Oversight (E) Task Force
December 3, 2007
The Examination Oversight (E) Task Force met on Monday, December 3, 2007.
During this meeting, the Task Force heard reports from the following groups:
- Report of the Audit Software Working Group: The Audit Software Working Group held a conference call on November 14, 2007. During the conference call, the Working Group received an update on TeamMate usage, the Citrix Server, ACL and TeamMate Training and the Exam Tracking System. The Working Group then discussed and adopted guidance into Exhibit C, Section E – Contingency Planning and Attachment B – Service Provider Questionnaire of the NAIC Financial Condition Examiner’s Handbook, in response to recommendations included in the Government Accountability Office’s Report on Insurance Company Preparedness. In addition, the Working Group adopted new guidance on Examination of Computer-Based Operations to be included in the 2008 Financial Condition Examiners Handbook. Finally, the Working Group discussed and approved of posting optional tools to Statenet and I-SITE for IT examiner use including the IT Examination Planning Memo, Standard Summary Report, ISQ test procedures referencing the COBIT framework, and an automated Technology Summary report. The report of the Audit Software Working Group was adopted by the Task Force.
- Report of the Analyst Team System Oversight Working Group: The Analyst Team System Oversight Working Group met in executive session via conference call on November 27, 2007 to discuss the status and maintenance of a confidential regulator only financial analysis tool. The report of the Working Group was received by the Task Force.
- Report of the Financial Analysis Handbook Working Group: The Financial Analysis Handbook Working Group conducted an electronic vote on October 30, 2007 in which the Working Group received interested party comments regarding the drafted revisions to the 2007 NAIC Financial Analysis Handbook and adopted the revisions to the Handbook with several friendly amendments. The report of the Working Group was adopted by the Task Force.
- Report of the Financial Examiners Handbook Technical Group: The Financial Examiners Handbook Technical Group met via conference call on November 15, 2007. During this call, the Technical Group discussed and adopted the following guidance to be included in the 2008 NAIC Financial Condition Examiners’ Handbook:
- Changes to the Reporting Examination Progress and Findings section of the Handbook that provide one standard format for all full-scope financial condition examination reports
- Exhibit Y – Examination Interviews that gives guidance to examiners discussing how and with whom exam interviews should be performed
- Exhibit Z – Examination Coordination which provides a format for states to document their attempts at coordination in examining companies that are part of a holding company group.
- Revised guidance on the calculation of planning materiality and tolerable error which had not been included in the 2007 Handbook
- Guidance related to the use of materiality in selecting key activities to be tested under the risk-focused examination approach
- Guidance related to testing for state compliance requirements as part of a risk-focused examination.
- Guidance on relying on control test work performed by internal/external auditors in a prior period
The report of the Technical Group was adopted by the Task Force.
After hearing reports from its groups, the Task Force discussed each of its 2007 charges and the Task Force’s role in the Principles Based Reserving project of the NAIC. The Task Force also discussed its plan to proceed with drafting revisions to Model Law #385, Model Regulation to Define Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition, due to the fact that the Appendix A request was approved by the Executive (EX) Committee.
Action Items: Adopted the report of the Audit Software Working Group.
- Received the report of the Analyst Team System Oversight Working Group.
- Adopted the report of the Financial Analysis Handbook Working Group.
- Adopted the report of the Financial Examiners Handbook Technical Group.