Methodology and Assumptions Flashcards
What should be considered to guide the choice of method and assumptions?
The purpose of the valuation
Where should there be consistency in the choice of method and assumptions?
- Across all components of the TPs
- With the determination of capital
- Actuarial assumptions for other purposes
What should the member make appropriate allowance for when valuing TPs
Contract boundaries
What can be done to assist in evaluating appropriateness of method and assumptions?
An experience analysis
List the elements that may be included in an experience analysis
- claim frequency relative to some measure of exposure
- rate of reporting claims
- rate of settling claims
- development of payments
- adequacy of case estimates
- incidence of large claims
- overall pattern of claim occurence for the duration of the policy period
- any other analysis relevant to the circumstance
List generally accepted actuarial methods for valuing TPs relating to past events
- BCL
- Inflated CL
- BF
- ACPC
- Bootstrap
- Expected Loss Ratio
- Cape Cod
- Berquist-Sherman
What are the choices for origin period and what should be considered when selecting one for triangulation of claims data?
Accident year, reporting year or UW year.
The choice has to be appropriate to the nature of the business
What should be considered when selecting the model to be used?
- Availability of data
- Nature of portfolio
- Results of exerience analysis
- Legislative restrictions
List the issues to consider when valuing cash-back and loyalty provisions
- Benefits payable as per policy wording
- Status of the policy as at valuation date
- Claims that may be made between the valuation date and anticipated bonus payout date
- Lapses
- Premium increases
How should negative provisions be treated?
Depends on the reserving policy and purpose of the valuation
Is VAT included in TPs
Generally excluded, unless stated otherwise
