Understanding the Actuarial Report on Reserves - casact.org

147 Pages·2014·2.23 MB·English

Understanding the Actuarial Report
on Reserves
2014 CLRS
September 17th, 2014
San Diego, CA
Welcome
Introductions

◦ Instructors:
 Alex Alimi, Ellen Edmonds, Kurt Johnson, Sally Levy,
Sara Hemmingson, Scott Lamb
Teams

Logistics

Schedule

◦ Breaks at 9:30 and 2:00
◦ Lunch at 11:20
Overview
Part 1 – Reserving Basics

Part 2 – Basic Reserving Methods

Part 3 – Comparison of

Methods/Selections and Diagnostics
Part 4 – Considerations for the Actuarial

Report on Reserves
Part 1
What is a reserve?
 An amount recorded in financial
statements or accounting systems in order
to reflect potential obligations.
Why is a reserve needed?
 There is a lag between the occurrence of
an insured event and the final payment to
the claimant.
Why is a reserve needed?
Insurer is now liable and financial
statements need to reflect this.
Why is a reserve needed?
8/15/2014 8/20/2014 8/25/2014
Accident occurs. Accident reported to Accident entered into
insurance company. insurance company
records. $20,000 case
reserve established.
11/25/2014 11/15/2014 9/30/2014
Payment sent. Claim settled for Insurance company
Case reserve $20,000. financial statement
reduced to $0. due.
Claim closed.
Who uses reserves and why?
 Company Management
 Enterprise Risk Management
 Regulators
 Rating Agencies
 Investors
 Analysts
 Mergers & Acquisitions
Actuarial Standards of Practice
Related to Loss Reserving
ASOP 1 – Introductory Actuarial Standard of Practice
ASOP 23 – Data Quality
ASOP 36 – Statements of Actuarial Opinion Regarding
Property/Casualty Loss and Loss Adjustment Expense
Reserves
ASOP 41 – Actuarial Communications
ASOP 43 – Property/Casualty Unpaid Claim Estimates
Actuarial Statement of
Principles
Related to Loss Reserving
 Provides guidance to actuaries preparing loss
reserve estimates
 Contains:
 Definition
 Principles
 Considerations