As A Reserving Actuary Do You Know Your ASOPs?

62 Pages·2009·0.78 MB·English

Casualty Loss Reserve Seminar
September 14 – 15, 2009, Chicago, Illinois
Moderator: Wendy Germani, FCAS, MAAA
Panelists: Mary Frances Miller, FCAS, MAAA
Jason Russ, FCAS, MAAA
Richard Marcks, FCAS, MAAA
ASOPs to know:
(cid:121) ASOP 43 – Property/Casualty Unpaid Claim
Estimates
(cid:121) ASOP 36 – Statement of Actuarial Opinion
Regarding Property/Casualty Loss and LAE
Reserves
(cid:121) ASOP 23 – Data Quality
(cid:121) ASOP 9 – Documentation and Disclosure in Property
and Casualty Ratemaking, Loss Reserving &
Valuations
(cid:121) ASOP 41 – Actuarial Communications
Questions:
(cid:121)When did you last read
these ASOPs?
(cid:121)Are you qualified?
(cid:121)Have you read the current
exposure drafts for 41 & 36?

ASOP 36 vs ASOP 43
(cid:121) ASOP 36 talks about how to form an opinion, and
what to say
Is the carried reserve reasonable?
(cid:121)
(cid:121) ASOP 43 talks about how to do the estimation work
How to get a reasonable estimate
(cid:121)
(cid:121) So in nearly all cases, an ASOP 43-compliant
analysis will precede application of ASOP 36
Analysis of Issues and Recommended Practice
Outline
(cid:121) Purpose or Use
(cid:121) Constraints
(cid:121) Scope
(cid:121) Understanding of the Nature of Claims
(cid:121) Unpaid Claim Estimate Analysis
(cid:121) Methods
(cid:121) Assumptions
(cid:121) Data
(cid:121) Recoverables (incl. collectibility, gross vs. net)
(cid:121) External conditions, changing conditions
(cid:121) Uncertainty
(cid:121) Unpaid Claim Estimate
(cid:121) Reasonableness tests
(cid:121) Presentation
Purpose or Use
“The actuary should identify the intended purpose or use of
the unpaid claim estimate”
(cid:121) One of the purposes is to allow you to opine on the carried reserve
(cid:121) Does not have to be the only purpose
(cid:121) E.g. your ASOP 43 analysis might also establish the number that will
be carried
(cid:121) The Statutory carried reserve is “management’s best estimate”
(cid:121) How are you going to evaluate that?
(cid:121) Expected Value or Actuarial Central Estimate?
(cid:121) With or without a risk margin?
(cid:121) Do you need to consider discounting?
Handling of Constraints
• Sometimes constraints exist in the performance of
an actuarial analysis, such as those due to limited
data, staff or time. Where the actuary believes that
such constraints create a significant risk that a
more in-depth analysis would produce a materially
different result, the actuary should notify the
principal of that risk communicate the constraints
on the analysis to the principal
• If you are subject to a significant constraint, you run
the risk that you cannot then form an opinion
• The “no opinion” opinion
Scope of the Estimate
“The actuary should determine the scope of the
unpaid claims estimate.”
(cid:121) Gross or net
(cid:121) Collectibility risk
(cid:121) Unpaid claim adjustment expenses
(cid:121) Cohorts of claims
(cid:121) Other items needed to sufficiently describe scope
(cid:121) Your analysis should match the scope to the opinion
scope
Methods and Models
Actuary should select specific methods and/or
models, modify or develop new ones based on
relevant issues:
Intended purpose, nature and scope
(cid:121)
Nature of claims, exposures
(cid:121)
Development characteristics
(cid:121)
Characteristics of available data and applicability
(cid:121)
to available data
Validity of assumptions underlying each method
(cid:121)
or model