2016 Fall #21
The answer provided in the exam report to part a.i. refers to the carried reserves being within the appointed actuary's range of unpaid claim estimates.
My question is, is there a meaningful difference between the term "reserves" and "unpaid claim estimates?"
I ask because I answered the question with the justification that the carried reserves were within the appointed actuary's range of reasonable reserves, which I feel is equivalent to the answer provided in the exam report.
Comments
No, in my opinion and in this context, reserves and unpaid claim estimates are referring to the same thing (covers case reserves, IBNR, LAE reserves).
I guess if you wanted to be really nuanced about it, reserves are an actual dollar amount that you would find on a company's balance sheet, and an unpaid claim estimate is going to be the estimate of what those reserves should be. Different actuaries may come up with different estimates. In reality, a company can carry more or less reserves than an actuary recommends.
Do we need to understand the details of loss portfolio transfer? I dont recall it being covered in the articles?
Apologies for the delay in answering. Our staff will get back to you shortly.
I don't think you need to understand all the details of it. It's essentially a 100% quota share agreement - the insurance company is selling (transferring) all the risk elsewhere (another insurance company, a reinsurer, etc).
I'm not clear on the reasoning behind the answer to part a) ii).
The examiner's report states that LPT's are retroactive reinsurance and under SAP they are a contra-liability on the balance sheet.
Ok, so what? The balance sheet I believe shows losses and LAE net of reinsurance... correct?
I'm not getting how this doesn't impact reserves. I thought the amount on the balance sheet is supposed to match with what is shown in Exhibit A for Loss and LAE reserves.
Is the reasoning that when there's retroactive reinsurance the balance sheet and exhibit A no longer match?