Reserving Philosophy Flashcards
1
Q
What is a reserve?
A
An estimate of the final net cost of a claim to the insurer
2
Q
Why is it important to set appropriate reserves?
A
- To indicate whether an insurer is financially solvent (ensures they have capital to meet their claims)
- To assist with underwriting decisions
3
Q
Who is chiefly responsible for setting reserves?
A
Claims staff - on individual claims
Actuaries - for IBNR or IBNER
4
Q
What is IBNR?
A
Incurred but not reported
5
Q
What is IBNER?
A
Incurred but not enough reported
6
Q
What action may be taken, and by who, if an insurance company is not setting appropriate reserves?
A
The PRA may intervene and stop the company trading
7
Q
How do insurers demonstrate to the PRA that they are setting appropriate reserves?
A
They must submit detailed yearly accounts showing their reserves by class of business and year
