5 - Odomirok.15 - Schedule P

Question 1

Describe the functions of Schedule P & identify which Parts provide that information

Answer 1

DT – RAPID
D - Development of reserves over time attributable to specific years & lines (Parts 2, 3, 4)
T - Trends in frequency & severity (Parts 1, 2, 5)

R - calculate RBC loss-sensitive discount (Part 7)
A - evaluate Adequacy of recorded reserves (Part 2, 5)
P - determine Payment patterns for discounting (Part 3)
I - observe split between actuarial reserves (IBNR) and case reserves (Parts 4, 5)
D - Disclosures for the SAO (Part 1)

Question 2

How is Schedule P organized?

Answer 2

Part 1 - tables of everything by accident year (losses, expenses, premiums, claim counts)
Parts 2,3,4 - triangles of losses (ultimates in Part 2, paids in Part 3, IBNR in Part 4)
Part 5 - triangles of claim counts
Part 6 - triangles of earned premium
Part 7 - tables & triangles for loss-sensitive contracts

Question 3

If sal/sub is shown in Part 1 of Sch P, the total paid and unpaid amounts are ________ of sal/sub

Answer 3

net

Question 4

For Sch P, Part 7A concerns _______ insurance

Answer 4

primary

Question 5

For Sch P, Part 7B concerns _________

Answer 5

assumed reinsurance

Question 6

In Sch P Part 2, does Incurred Loss = Ultimate Loss?

Answer 6

Yes, it includes IBNR

Question 7

Sch P Parts 2-4, formula for case reserves

Answer 7

Part 2 - Part 3 - Part 4

Incurred (Ult) - Paid - IBNR

Question 8

Case incurred in CY formula

Answer 8

sum of change in case in CY + sum paid in CY

Question 9

Identify cautions when using Schedule P to assess reserve adequacy

Answer 9

*Talk to people - get a deeper understanding of what’s going on at the company
*10 - Schedule P has a max of 10 years of data which is a problem for long tail lines
*Pooling - 1) Internal pooling can distort data and 2) Participation in voluntary/involuntary pools can distort data (because many pools report IBNR as case reserves)
*Commutations - A commutation can cause a sudden increase in net reserves
*DCC - Schedule P Parts 2,3,4 include DCC meaning we can’t separate DCC trends from loss trends
*Preparation of Schedule P - person preparing Schedule P has a certain amount of choice regarding allocations and presentations