- TIA EXAM 5 - CAS 2 RESERVING

• Case reserve
• Prov for future dvpmt on known clms
• Reopen clm reserve
• Prov for clms IBNR
• Prov for clms in transit

• Accounting date: date that defines the group of clms for which liability may exist
• Valuation date: date through which transactions are included in the database used in the evaluation of the liability, regardless of when the analysis is performed

·reserve shown in a published statement

• Result of the application of a particular loss
• reserving evaluation procedure

• represents the amount, estimated as of the
• valuation date, that will be required for future payments on claims that
• already have been reported to the insurer

• Sum of the values assigned to specific known
• claims

Change between valuation dates in the observed values of certain fundamental quantities that may be used in the loss reserve process

• provision for future payment on claims closed as
• of the accounting date that may be reopened due to circumstances not foreseen
• at closing time

An actuarially sound loss reserve for a defined group of claims as of a given valuation date, is a provision based on reasonable assumptions and appropriate actuarial methods for the unpaid amount required to settle all claims, whether reported or not for which a liability exists on a particular accounting date

An actuarially sound LAE reserve, for a defined group of claims on a given valuation date, is a provision based on reasonable assumptions and appropriate acuarial methods, for the unpaid amount needed to investigate, defend, and effect the settlement of all claims, whether reported or not for which a liability exists on a particular accounting date

The uncertainty inherent in the loss reserving process implies that a range of estimates can be actuarially sound. The ultimate value of the amounts unpaid cannot be known until all attendant claims are settled

The most appropriate loss reserve from a range of reasonable estimates will depend on the relative likelihood of the estimates within the range and the financial reporting context in which the reserves will be presented

• Homogeneity
• Credibility
• Emergence/Settlmt/Dvpmt patterns
• Operational changes
• Changes in contract
• External influences

Delay between occurence and recording of claims

Time that it normally takes for reported claims to be settled

Changes in claims practices may afftect consistency

New computer systems, accounting changes, change in claim handling that affects reserving

Limits, deductibles, or coverate attachment points

• Judicial environment
• Regulatory/Legislative changes
• Inflation
• Residual Market

• May include provision for time value of money
• May need explicit provision for uncertainty when indicated ultimate loss subject to high variability
• Provision for uncertainty of undiscounted amount

• Incurred losses implied by reserves should be measured against relevant indicators (premiums, exposures) and expressed wherever possible in terms of freq, sev, LRs
• Should explain big differences

• Selection of approriate method is actuary's responsibility
• Usually examine indications of more than 1 method when estimating reserve for specific grp of clms