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).

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