1. 2006 PARIS

2. The Realities and Duties of 21 st Century – Insurance Consulting Actuaries: after and beyond SOX Chairman: Nick Dexter UK Presenters: Mike Renetzky US Ad Kok The Netherlands 1 st June 2006 11:00 – 12:30

3. The Realities and Duties of 21st Century - Insurance Consulting Actuaries: after and beyond SOX Michael K. Renetzky, Esq. Partner Lord, Bissell & Brook LLP Chicago, USA

4. This presentation is solely for educational and informational purposes. It is not intended to constitute legal advice or to create an attorney-client relationship.

5. SOMMAIRE/ SUMMARY Sarbanes-Oxley Act of 2002 A - Scope B - Brief Overview C - Evaluation The NAIC and SOX for Insurance Companies A - Reinsurance Attestations B - Internal Controls C - Other SOX Matters The Role for Consulting Actuaries A - Reinsurance and Risk Transfer B - Model Audit Rule and Other Opportunities

6. Scope United States of America Congress response to egregious acts –Enron, WorldCom, Tyco, Adelphia Primarily impacts public companies Sarbanes-Oxley Act of 2002

7. Brief Overview Audit Committees Gatekeepers Senior executive certifications/attestations Sarbanes-Oxley Act of 2002

8. Brief Overview cont’d Internal Controls Code of Ethics Whistleblower protection Insider transactions Sarbanes-Oxley Act of 2002

9. Evaluation PCAOB report GAO report SEC advisory panel Commissioner Glassman SEC/PCAOB roundtable Sarbanes-Oxley Act of 2002

10. Evaluation cont’d Voluntary compliance –Nonprofit sector –Non-US companies (e.g. Lafarge) Sarbanes-Oxley Act of 2002

11. NAIC and State Developments Reinsurance Attestations Effective with 2005 Annual Statements Scope –Reinsurance contracts for which financial statement credit is taken –January 1, 1994 - enter, renew or amend

12. NAIC and State Developments Reinsurance Attestations cont’d To the best of CEO/CFO’s knowledge and belief after diligent inquiry –No side letters or agreements affecting actual or potential loss –Documentation of economic intent and risk transfer analysis (unless self-evident)

13. NAIC and State Developments Reinsurance Attestations cont’d To the best of their knowledge and belief after diligent inquiry –Compliance with SSAP No. 62 –Appropriate controls to monitor use of reinsurance and compliance with SSAP No. 62

14. NAIC and State Developments Reinsurance Attestations cont’d Risk transfer –Is it self-evident? –Is a significant risk transferred? –Cash flow testing

15. NAIC and State Developments Reinsurance Attestations cont’d Cash flow testing –Build the model –Assumptions regarding ultimate loss, loss payment patterns, discount rates –Test historical results and hypothetical scenarios

16. NAIC and State Developments Internal controls Proposed revisions to Model Audit Rule Applies to non-public insurance companies Exemption thresholds Accreditation process

17. NAIC and State Developments Internal controls cont’d Status –NAIC/AICPA working group –Financial Condition (E) committee –Possible adoption this month?

18. NAIC and State Developments Internal controls cont’d No accountant attestation; report to management in lieu SAS 60 or equivalent requirement

19. NAIC and State Developments Internal controls cont’d Management report –Management is responsible for establishing and maintaining controls –Controls are effective to the best of management’s knowledge and belief, after diligent inquiry

20. NAIC and State Developments Internal controls cont’d Management report –Statement of approach for evaluation –Disclosure of unremediated material weaknesses

21. NAIC and State Developments Other SOX Matters Outside directors/independent directors Independent auditor standards –prohibition on certain actuarial services Code of ethics

22. The Role for Consulting Actuaries Reinsurance and risk transfer analysis Controls relating to reserve creation and maintenance Consultants to outside directors Fill need created by proposed limitations on independent auditors

23. Michael K. Renetzky, Esq. Lord, Bissell & Brook LLP Atlanta - Chicago - London - Los Angeles - New York - Washington mrenetzky@lordbissell.com (312) 443-1823

24. The Realities and Duties of 21st Century - Insurance Consulting Actuaries After and beyond SOX Ad Kok Principal Watson Wyatt Ltd.

25. SOMMAIRE/ SUMMARY Are Actuaries in control now? A - Documentation B - Processes C - Positioning The Actuarial Relationships A - Management B - Supervisors C - Auditors D - Risk managers Role for Consulting Actuaries A - Show me and do not trust me B - Beyond Sox C - External sign off

26. Documentation –Lagging behind Processes –Enabling to control –Responsibilities Positioning –Independent Are Actuaries in control now?

27. Management –Reporting structure Supervisors –International consensus? –Agreed framework? Auditors –Agreed roles and responsibilities? Risk Managers –Existing relationship? The Actuarial Relationships

28. Show me and do not trust me –External vs. Internal Beyond Sox – Control framework External sign-off –Irreversible development? Role for Consulting Actuaries

29. SOMMAIRE/ SUMMARY Are Actuaries in control now? The Actuarial Relationships Role for Consulting Actuaries