CIA.Subseq Case Study

Question 1

Catastrophic Event
Fact: Describe the timeline of events for 1998 ice store
Branch: Which branch of subsequent event decision tree should the ice storm follow
Action: According to subsequent event decision tree, what action should the actuary take regarding the ICE STORM example follow
Relevant Comments

Answer 1

Event: 1998/01/05 Ice storm in Eastern Canada
Actuary became aware: same day
Subsequent event? Yes, actuary became aware after Calc Dt (1998/12/15) and before report date (several weeks after 1998/01/05)

Branch: Middle

EWDP - inform:
- Error: No error
- When: Event occurred after calc date
- Different: yes after calc date
- Purpose: report on entity as it was
Final decision: Inform only

Relevant Comments:
- Ice storm doesn’t make entity different retroactively
- Purpose of the actuary’s work was to report on the entity as it was
- but note that premium liabilities would have been understated

Question 2

Late Reported Claims

Fact, Branch, Action, Relevant Comments

Answer 2

Event: November 20 (case reserve increased by ceding insurer
Actuary become aware: January 12
Subsequent event? Yes, actuary became aware after calc date (12/31) and before report date ( several weeks after January 12, 1998)

Branch: Middle

EW - reflect:
Error? No,
When? event occured before calc date
Final decision: reflect

Relevant Comments:
- situation often arises for reinsurers
- not the same as a data error or missing claims

Question 3

Judicial Decisions

Fact, Branch, Action, Relevant Comments

Answer 3

Event: February 8, 2008 ($4000 Alberta minor injury cap struck down)
Actuary became aware: same day
Subsequent event? Depended on each insurer’s report date

Branch: Middle (if insurer’s report date was after Feb 8, so it was subsequent event)
Branch: Right (if insurer’s report date was before Feb 8, so it wasn’t a subsequent event)

Action:
Middle branch - EWD - reflect
Right branch -
if material -> RI-withdraw/amend
if not material -? inform (“no action” may not be enough for industry wide events)

Relevant Comments: Complicated because some insurers would have completed their report by Feb 8, whiles others may have not

Question 4

Change in Markets

Fact, Branch, Action, Relevant Comments

Answer 4

Event: First week of Jan (big drop in stock)
Actuary became aware: 1st week of Jan
Subsequent event? Yes actuary became aware after calc date (12/31) and before report date (several weeks after jan 1st)

Branch: Middle

Action: EWDP - inform
Error? No
When? After Calc date
Different? Yes, after calc date
Purpose? Report on entity as it was
Final Decision: inform only

Relevant Comments:
- Main issue is whether the market drop provided evidence of conditions in existence prior to calc date or not
- It was decided was that it did not

Question 5

Reinsurer Failure

Fact, Branch, Action, Relevant Comments

Answer 5

Event: January 15
Actuary became aware: Same day
Subsequent event? yes actuary became away after calc date (12/31) and before report date (several weeks after January 15)

Branch: Middle

Action: EWD - reflect
Error? No
When? After calc date
Different? Yes, before calc date (failure provided evidence of prior deteriorating conditions)
Final action: reflect

Relevant Comments:
- action depends on cause of failure: here reinsurer had been building prior to Calc date; failure after calc date simply provided further evidence of conditions existing prior to calc date
- if failure was due to a catastrophe, path through decision tree would be EWDP = fail action would be inform only

Question 6

Missing Claims

Fact, Branch, Action, Relevant Comments

Answer 6

Event: Before Jun 30 (claim data base was missing claims)
Actuary became aware: August 5
Subsequent event? Yes actuary became aware after calc date and before report date (report date after aug 5)

Branch: Middle

Action: E-reflect
Error? Yes
Final Decision: reflect

Relevant Comments:
- If actuary become aware after report date then it wouldn’t be a subsequent event; it would be right branch instead. Following the tree Event would invalidate the report and thus need to be withdrawn or amended

Question 7

Changes in Industry Benchmarks

Fact, Branch, Action, Relevant Comments

Answer 7

Event: Jul 15 (new industry LDF benchmark released)
Actuary became aware: July 15
Subsequent event? Yes actuary becamse aware after quarterly calc date (6/30) and before report date (several weeks after Jul 15)

Branch: Middle

Action: EWD - stop
Error? No
When? After calc date
Different? event didn’t make entity different - LDFs don’t change much from quarter to quarter
Final action: nothing

Relevant Comments: situation could arise for a new company without it’s own credible data

Question 8

Pandemic

Fact, Branch, Action, Relevant Comments

Answer 8

Event: March 31 (Pandemic declared)
Actuary became aware: March 11
Subsequent event? Yes, Actuary became aware after calc date (12/31) and before report date

Branch: Middle

Action: EWDP - inform
Error? No
When? Event occurred after calc date
Different? Yes, after calc date
Purpose? Report on entity as it was
Final Decision: Inform only

Relevant Comments: Provide potential impacts of the impact of the pandemic either qualitatively or quantitatively. When situation for classification is unclear, discuss with auditor.