The Reserve Call Flashcards
Why is accurate reserving important?
- Ensure the company maintains adequate funds to uphold policy holder obligations
- Promote stable and consistent earnings for the company
- Provide an accurate view of ultimate loss performance by coverage and segment that informs pricing and planning
- Provide an accurate view of payment patterns that inform investment strategy
Three Viewpoints in Reserve Call
- Internal Management: Makes the reserve booking decisions and sees all aspects of the company so they are the ones actuaries have to convince
- Investors: Look at how strong the balance sheet is and if the company is profitable
- Regulators: Manage the solvency of the company
Appointed Actuary
Established by regulators to make sure the CEO understands why the liabilities are changing and why investors should make certain decisions
Explain the Reserve Call Process
- Dates refreshed every 3-6 months
- Calculate methods and select new ultimates based off of refreshed data
- Propose change in ultimates to executives
- Sign-off the booking actions
- Changes are communicated through business partners
- Results are reflected in earnings for the quarter
- Update model assumptions in the off-months
Position
Difference between indicated and booked reserve is called position. A positive position indicated the business is being more conservative than indicated
What is Wiser’s 4-phase approach to estimating unpaid claims?
- Exploring the Data
a. Key characteristics
b. Anomalies
c. Data Balancing to verified sources - Apply appropriate techniques for estimation
- Evaluating Results
a. Reconcile conflicting results
b. Explain outcomes - Monitoring Projections
Deductible
The amount below which the insured will pay for the claim, but the
insurer will handle
Gross Data
Value before you take parameters out
Net Data
Value after you take parameters out
Ceded Data
Portion given to the reinsurer
True Net Data
When gross, net, and ceded are all considered
