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What is the purpose of ASOP 43?
Provide guidance to actuaries on estimating unpaid claims
To whom does ASOP 43 apply to?
*Actuaries developing unpaid claim estimates for events that have already occurredor will have occurred as of an accounting date
*All classes of entities - self-insureds, insurance companies, reinsurers, and government
*Gross of recoverables, net of recoverables, and estimates of such recoverables
Define Actuarial Central Estimate
Represents an expected value over the range of reasonably possible outcomes
Define Claim Adjustment Expense
Costs of administering, determining coverage for, settling, or defending claims even if claim is invalid
Define Process Risk
Risk associated with projection of future contingencies that are inherently variable, even when parameters are known with certainty
What should Actuary disclose when estimating unpaid claims?
- 1.Intended measure (high or low estimate, median, mode, actuarial central estimate)
- 2. If gross or net of recoverables
- 3.If and to what extent collectibility risk is considered
- 4. Specific types of unpaid claim adjustment expenses covered
- 5. Types of claims covered (type of loss, year, line, province)
In an "Unpaid Claim Estimate", consider:
- Methods & Models
- • relevant factors for selection, modification, and/or development
- • Different methods for different components (e.g., coverages within a line)
- •Whether reliance on a single method may be appropriate• If an update, are same methods appropriate
- Assumptions• Consider reasonableness of assumptions underlying each method
- • May be implicit or explicit
- • Should have no known significant bias for intended purpose
- Gross vs Net
- External Conditions that will have material effect
- • e.g. potential economic changes, regulations, judicial decisions, social forcesUncertainty - decide if needs to be measured
What should Actuary take into account?
- 1. Reasonableness of estimate
- 2. Multiple components - if reasonably consistent
- 3. Presentation - point estimate, range, point with margin
In Actuarial Communication, what should be disclosed?
- Intended purposes
- Significant limitations
- Scope of unpaid claim estimate
- Dates - acctg, validation, review
- Specific significant risks & uncertainties
- Significant events, assumptions or reliances that have material effect