Schedule P

Question 1

What information does Schedule P Provide

Answer 1

1. Detailed underlying Loss & LAE Reserves from Balance Sheet
2. Includes 10 Years of Loss & DCC

Question 2

What is a common reason for outside Parties to refer to a Company’s Schedule P

Answer 2

to evaluate company’s reserve adequacy

Question 3

How many parts comprise Schedule P

Answer 3

7

Question 4

How is Schedule P Data segmented

Answer 4

by line of business and AY

Question 5

Identify the common uses of Schedule-P and the applicable part from Schedule P

Answer 5

D: Development of reserves over time, attributable to specific years and lobs (2,3,4)
T: Trends in Frequency & Severity (1,2,5)

R: Calculate RBC Loss Sensitive Discounts (part 7)
A: Evaluate adequacy of recorded reserves (2,5)
P: Determine payment patterns for discounting (part 3)
I: Observer difference b/w Actuarial Reserves (IBRN) and Case Reserves (4,5)
D: Disclosures for the SAO (Statement of Actuarial Opinion) (Part 1)

Question 6

Identify the contents of each part of schedule P

Answer 6

Part 1: Everything (Premiums, losses, LAE, discounts)
Part2: Incurred Net Losses
Part 3: Net Cumulative Paid Loses
Part 4: IBNR
Part 5: Claim Counts (Closed with Pay, outstanding, reported)
Part 6: Earned Premium
Part 7: Tables and Triangles for Loss Sensitive Discounts

Question 7

identify the Schedule P yearly reporting convention for: Medical Professional Liability (Claims-Made)

Answer 7

report year

Question 8

identify the Schedule P yearly reporting convention for: Commercial Auto Liability/Medical(Occurrence)

Answer 8

Accident year

Question 9

identify the Schedule P yearly reporting convention for: Products Liability (Tail Coverage)

Answer 9

policy year

Question 10

how would you calculate average case outstanding severity using Schedule P

Answer 10

average case oustanding severity
= [ (Schedule P, Part 2) – (Schedule P, Part 3) – (Schedule P, Part 4) ] / (Schedule P, Part 5, Section 2)
= (Ultimate – Paid – IBNR) / (Outstanding claim count)

Question 11

explain how average case outstanding severity affects an adequacy of reserves

Answer 11

changes in average case O/S may indicate strengthening or weakening of case reserves

Question 12

why should you be cautious when using Schedule P - Part 5 to compare companies (3)

Answer 12

Schedule P - Part 5 shows claims counts

• Schedule P doesn’t indicate whether counts are recorded on a ‘per-claim’ or ‘per-claimant’ basis
• definition of closed claim can vary
• a commutation may distort the count triangles

Question 13

identify cautions or limitations when using Schedule P to assess reserve adequacy

Answer 13

talk to people!
- numbers don’t tell the whole story – must also talk to management
- EXAMPLE: Sched P is net of reinsurance and doesn’t reflect credit risk
10
- maximum # of years of data carried in Schedule P exhibits
- long-tailed lines need external data to estimate tail factors
pooling
[1] internal pooling can distort data
[2] participation in voluntary/involuntary pools distort data (many pools report IBNR as case)
commutations
- can cause a sudden increase in net reserves
DCC
- Schedule P, Parts 2,3,4 include DCC
- can’t separate DCC trends from loss trends
preparation of Schedule P
- allows choice in allocations & presentations

Question 14

identify changes in a company’s business to consider when using Schedule P to assess reserve adequacy

Answer 14

examiner’s report required 3 of these:

• mix of business
• reserving practices
• claim settlement practices
• growth/shrinkage
• retentions
• limits
• intercompany pooling
• definition of claim count
• commutations