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Understanding Casualty Reserve Developments: Insights from the 2004 Seminar

This presentation by Chuck Emma, FCAS, MAAA, delves into the complexities of casualty loss reserve developments as discussed at the 2004 Casualty Loss Reserve Seminar in Las Vegas. Key topics include the implications of recent company failures, continuing reserve developments, and questions raised in a November 2003 S&P article. The analysis explores the role of actuaries, the significance of statutory annual statements (SAOs), and how various factors like asbestos, reinsurance, and accident years contribute to the industry's challenges, highlighting both management and actuaries' responsibilities.

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Understanding Casualty Reserve Developments: Insights from the 2004 Seminar

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Presentation Transcript

  1. Reserve Developments and Actuarial Practice Chuck Emma, FCAS, MAAA 2004 Casualty Loss Reserve Seminar September 14, 2004 Las Vegas

  2. Background • Company Failures/Impairments/Downgrades • Continuing Reserve Developments • Nov. 2003 S&P Article

  3. Questions • Are reserve developments a cause, a symptom, or a lagging indicator of the industry’s problems? • Is the SAO serving the industry properly? • What is the role of actuarial practice?

  4. Analysis of Company Developments • $41BB over two years • 30 Largest Developments • 2002: 75% of industry development • 2003: 95% of industry development

  5. Analysis of Company Developments • Where’s This Coming From? • 30-35% Asbestos related • 40% “Reinsurance”, Excess Casualty • 30% includes WC, MM, Mold • 80-85% are from accident years 1997-2001

  6. Analysis of Company Developments • SAO’s • Approximately 50% contain RMAD disclosure • 80% of appointed actuaries are employees • A&E represents approximately 10% of 2003 reserves as stated in the SAO

  7. Analysis of Company Developments • What Does this Mean? • Underlying factors can not be isolated to one or two factors • Public Perception • Management’s responsibility • Actuaries’ responsibility

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