D4. ASOP 20

Question 1

Payment timing

Answer 1

• actuary has to predict timing and magnitude of future payments
• assumptions and consideration should be same used to determine full value reserves
• consider sensitivity of timing
• timing of recoveries

Question 2

Discounting rate options

Answer 2

• risk free rate
• portfolio approach is the anticipated return on a selected asset portfolio
• discount rates requested by another party

Question 3

Disclosures

Answer 3

• assumptions behind selected rate
• difference between undiscounted and discounted rates
• whether the reserves(discounted) include a risk margin and basis
• significant limitations
• reliance on other sources

Question 4

Recommended practices

Answer 4

• Beware of context in which discounted reserves will be used.
• significance of assumptions vary with undiscounted vs discounted