State regulators on the National Association of Insurance Commissioners’ Casualty Actuarial Task Force discussed the final draft of their proposed changes to the actuarial instruction at its June 10 session during the NAIC’s Summer National Meeting in Philadelphia.
The most hotly debated issue was whether or not to include in the actuarial report an estimate for loss reserves, as well as a high- and low-end estimates of the reasonable range for the reserves.
“While regulators feel this will give them a better indication of the reasonableness of the reserves, the Alliance is concerned that this will change the perception of the Actuarial Opinion,” James Olson, Alliance of American Insurers (AAI) director of financial regulation, commented. “The reason for having an opinion is to offer an objective assessment of how reasonable an insurer’s reserves are. If adopted, the suggested change could lead to the perception that independent actuaries actually set the reserve amount, thereby taking this important function out of the hands of company management.
“The actuarial opinion is important aspect of a company’s overall financial picture. However, it is the Alliance’s firm belief that an insurance company’s own management is best qualified to make such an important business decision. The role of the actuary is to opine on the reasonableness of the reserve.”
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