ASOP 43: P&C Unpaid Claim Estimates

Question 1

Actions the actuary must take if constraints apply to the analysis which may potentially materially impact the results:

Answer 1

• Notify the principal of the risk

- Communicate the constraints to the principal

Question 2

Items regarding the unpaid claim estimate that need to be identified by the actuary:

Answer 2

• Intended measure of the unpaid claim estimate, in addition to whether it is discounted
• whether the reserve is gross or net of specified recoverables
• extent of reinsurance collectability risk
• types of unpaid claim adjustment expenses included in the unpaid claim estimate
• the claims covered by the estimate

Question 3

Factors that the actuary should consider when determining the appropriate method to derive the reserves:

Answer 3

• Purpose (internal analysis vs external reporting)
• Nature of claims & exposure
• Development characteristics of the claims
• Characteristics of the available data
• Applicability of various methods to the available data
• Reasonableness of the assumptions underlying the various methods

Question 4

Items that need to be disclosed when deriving the unpaid claim estimate:

Answer 4

• Intended purpose(s) of the estimate.
• Significant limitations
• Scope
• Accounting date, Valuation date & Review date
• Specific significant risks & uncertainties
• Significant events, assumptions or reliances that have a material impact on the estimate.
• Basis for the range
• If the estimate is an update of a prior estimate, changes of assumptions, procedures or methods that had a material impact