Chapter 13 Main

Question 1

Name the purposes for calculating reserves

Answer 1

To determine liabilities shown in published accounts.
For supervision of solvency.
To be shown in internal management accounts.
Provide independent opinion on reserves already calculated.
Provide info to mgmt on how business is performing.
Estimate claims cost as part of rating process.
To value the insurer for purchase or sale.
To negotiate a commutation for the buyer or seller.
To transfer a book of business.
To ascertain the tax liabilities of a general provider.
To test the adequacy of case estimates.

Question 2

Matters to consider when calculating reserves for published accounts

Answer 2

Should have regard for legislation and accounting principles of territory:
Does it need to be going concern basis?
Are the accounts required to show a true and fair view?
Need to be calculated on best estimate or some other basis?
Does the reserves need to be discounted?

Question 3

What impacts the choice reserving method

Answer 3

The class of business, particularly the length of the tail.
The types of claim that has or will occur.
The extent and quality of the available data.
Age of business (historic claim development data available)
Historical trends and patterns.
The purpose of the reserving exercise.