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Course on Professionalism ASOP 43 – Property / Casualty Unpaid Claim Estimates.

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Presentation on theme: "Course on Professionalism ASOP 43 – Property / Casualty Unpaid Claim Estimates."— Presentation transcript:

1 Course on Professionalism ASOP 43 – Property / Casualty Unpaid Claim Estimates

2 2 Overview Background Information Background Information Scope and Effective Date Scope and Effective Date Definitions Definitions Required Disclosures Required Disclosures

3 3 Background Information Prior to Implementation of ASOP 43, guidance was limited to: Prior to Implementation of ASOP 43, guidance was limited to: Statement of Principles Regarding P&C Loss and LAE Reserves Statement of Principles Regarding P&C Loss and LAE Reserves ASOP No Prescribed Statement of Actuarial Opinion ASOP No Prescribed Statement of Actuarial Opinion No ASOP specifically related to developing unpaid claim estimates, despite the significant portion of the actuarial work in this area. No ASOP specifically related to developing unpaid claim estimates, despite the significant portion of the actuarial work in this area. ASOP 43 was effective September 1, 2007 ASOP 43 was effective September 1, 2007

4 4 Scope Applicable when: Applicable when: Estimating unpaid P&C claim liabilities for all classes of entities Estimating unpaid P&C claim liabilities for all classes of entities Developing unpaid claim liabilities for events that have already occurred Developing unpaid claim liabilities for events that have already occurred Communicating actuarial findings in written or electronic form Communicating actuarial findings in written or electronic form Applies only to undiscounted value estimates. See ASOP No. 20 Applies only to undiscounted value estimates. See ASOP No. 20 Applies to unpaid claim estimate portion for PSAO. See ASOP No. 36 Applies to unpaid claim estimate portion for PSAO. See ASOP No. 36

5 5 Scope (contd.) Does not apply to: Oral communication Oral communication Ratemaking estimates (i.e. future events) Ratemaking estimates (i.e. future events) Actions taken by the user based on results of analysis Actions taken by the user based on results of analysis Estimation of items that may be a function of unpaid claim estimates or claim outcomes Estimation of items that may be a function of unpaid claim estimates or claim outcomes Unpaid claims covered by ASOP No. 5 or ASOP No. 42 Unpaid claims covered by ASOP No. 5 or ASOP No. 42 standard does apply to health benefits associated with state or federal WC statutes and liability policies. standard does apply to health benefits associated with state or federal WC statutes and liability policies.

6 6 Question #1 ASOP 43 applies to which of the following? ASOP 43 applies to which of the following? A. Oral communication of findings B. Ratemaking analyses C. communications of unpaid claim estimates D. Reinsurance contract profit sharing liabilities or contra- liabilities

7 7 Definitions From Section 2 of the ASOP: Actuarial Central Estimate (“ACE”) Actuarial Central Estimate (“ACE”) Claim Adjustment Expense Claim Adjustment Expense Coverage Coverage Event Event Method Method Model Model Model Risk Parameter Risk Principal Process Risk Unpaid Claim Estimate Unpaid Claim Estimate Analysis

8 8 Required Disclosures Intended Purpose or Use: Intended Purpose or Use: External financial reporting, internal management reporting, appraisals, etc. External financial reporting, internal management reporting, appraisals, etc. If multiple uses, should consider conflicts between uses If multiple uses, should consider conflicts between uses Constraints/Limitations (e.g. limited data, staff, time or other resources) Constraints/Limitations (e.g. limited data, staff, time or other resources) If a deeper analysis would produce a materially different result, notify Principal of risk & communicate constraints If a deeper analysis would produce a materially different result, notify Principal of risk & communicate constraints

9 9 Required Disclosures (contd.) Scope of the Unpaid Claim Estimate Scope of the Unpaid Claim Estimate Claims covered (e.g., line of business, accident year) Claims covered (e.g., line of business, accident year) Intended measure of unpaid claim estimate Intended measure of unpaid claim estimate Gross or net of specific recoverables Gross or net of specific recoverables Collectability risk – to what extent considered Collectability risk – to what extent considered Specific types of unpaid claims adjustment expenses included Specific types of unpaid claims adjustment expenses included Any amounts that are discounted Any amounts that are discounted

10 10 Question #2 Which of the following is not a required disclosure under ASOP 43? Which of the following is not a required disclosure under ASOP 43? A. Intended measure of unpaid claim estimates A. Intended measure of unpaid claim estimates B. Estimates were made either gross or net of recoveries B. Estimates were made either gross or net of recoveries C. Whether discount is incorporated into unpaid estimates C. Whether discount is incorporated into unpaid estimates D. Range of reasonable estimates around the actuarial central estimate D. Range of reasonable estimates around the actuarial central estimate

11 11 Required Disclosures (contd.) Dates Accounting date Accounting date Valuation date Valuation date Review date Review date

12 12 Required Disclosures (contd.) Significant events, assumptions, or reliances Disclose those that have material impact on estimates Disclose those that have material impact on estimates Disclose assumptions provided by Principal or outside party Disclose assumptions provided by Principal or outside party Additional disclosure if an actuary cannot determine reasonableness Additional disclosure if an actuary cannot determine reasonableness Type of range (if applicable) Examples Examples Range of estimates of the intended measure Range of estimates of the intended measure Confidence level - disclose risks Confidence level - disclose risks Changes in assumptions, procedures, methods, or models if material Applicable if study is an update of prior analysis Applicable if study is an update of prior analysis Discuss reasons for change (not required to quantify) Discuss reasons for change (not required to quantify)

13 13 Question #3 Which of the following is false regarding required disclosure of a change in assumptions or methods? Which of the following is false regarding required disclosure of a change in assumptions or methods? A. The change must be material A. The change must be material B. The changes come about in the course of your first analysis of the unpaid liability B. The changes come about in the course of your first analysis of the unpaid liability C. The actuary does not need to quantify the impact of the change C. The actuary does not need to quantify the impact of the change D. None of the above D. None of the above

14 14 Required Disclosures (contd.) Reliance on Single Method Disclose and discuss when not using multiple methods or models Does not apply when multiple methods used but single method selected Deviation from Standard To comply with applicable laws or for other reasons To comply with applicable laws or for other reasons Other deviation is permitted, but be prepared to justify Other deviation is permitted, but be prepared to justify

15 15 Question #4 Which of the following is true? Which of the following is true? A. Compliance with applicable laws is not an acceptable reason for deviation from this standard. A. Compliance with applicable laws is not an acceptable reason for deviation from this standard. B. Unexplained reliance on a single method is not a violation of this standard. B. Unexplained reliance on a single method is not a violation of this standard. C. Deviations from the standard are allowed if reasons can be justified. C. Deviations from the standard are allowed if reasons can be justified.


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