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CAS Loss Reserve Seminar

CAS Loss Reserve Seminar. Loss Reserving Issues for Small Insurance Companies Patrick J. Crowe, FCAS, MAAA, ARM Vice President and Actuary Kentucky Farm Bureau Insurance. Agenda. Ceded Reinsurance Loss Reserve Ranges Materiality. Ceded Reinsurance. Develop Direct and Net separately

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CAS Loss Reserve Seminar

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  1. CAS Loss Reserve Seminar • Loss Reserving Issues for Small Insurance Companies • Patrick J. Crowe, FCAS, MAAA, ARM • Vice President and Actuary • Kentucky Farm Bureau Insurance

  2. Agenda • Ceded Reinsurance • Loss Reserve Ranges • Materiality

  3. Ceded Reinsurance • Develop Direct and Net separately • Ceded Estimates • Paid Development (Additive, Multiplicative) • Incurred Development (Additive, Multiplicative) • Bornhuetter/Ferguson Approach • Expected Loss Ratio • Reinsurer estimates

  4. CASUALTY ACTARIAL SEMINAR • LOSS RESERVE RANGES

  5. Approach • The model projects lognormal loss development factors for each development period and accident year. • The expected mean and standard deviation for the lognormal distribution is selected for each loss development period. • Fifty thousand simulations were created for eight situations.

  6. Situations Analyzed • Auto #1: Auto Liability Historical incurred loss development patterns for small companies • Auto #2: Historical variance to mean ratio increased 100% • Auto #3:Historical variance to mean ratio increased 50%

  7. Situations Analyzed • Long Tail #1a: Long tail development • Long Tail #1b: Long tail development, variance to mean ratio increased 50% • Long Tail #1c: Long tail development, variance to mean ratio increased 100%

  8. Situations Analyzed • Long Tail #2a: Long tail development increased and variance to mean ratio increased 50% • Long Tail #2b: 1) above with variance to mean ratio increased 100%

  9. CAS LOSS RESERVE SEMINAR

  10. LOGNORMAL SIMULATION

  11. CAS LOSS RESERVE SEMINAR

  12. CAS LOSS RESERVE SEMINAR

  13. CAS LOSS RESERVE SEMINAR

  14. CAS LOSS RESERVE SEMINAR

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  17. CAS LOSS RESERVE SEMINAR

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  20. CAS LOSS RESERVE SEMINAR

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  22. CASUALTY ACTARIAL SEMINAR • MATERIALITY

  23. Materiality • The viewpoint of some regulators is that he Statement of Opinion is intended to assure the regulator that the Company’s reserve position will be adequate for the next 12 months until a new Opinion is issued. So, those regulators feel the actuary should disclose any reason for concern that the reserves will be materially understated. They want to know if there is a need for close monitoring. • Joseph Herbers, 2002 Forum

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