Transcript Education for General Insurance Actuaries

Credibility and the
Casualty Actuary
Casualty Actuarial Society 2004 Annual Meeting
Mary Frances Miller
President
CAS Board
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The CAS Board devoted ½ day in September to
a discussion of what can be done to maintain or
improve the credibility of casualty actuarial
professionals
Particularly with regard to SAO’s on loss
reserves
Statement of the Problem
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Observers of the P/C insurance industry and users of
P/C insurance financial statements have expressed
significant doubt about the adequacy of the stated loss
reserves.
At the same time, the actuarial profession has largely
provided Statements of Actuarial Opinion that the
stated loss reserves make a reasonable provision for
unpaid losses.
These opinions have often been followed by significant
adverse development.
Statement of the Problem
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As a result, the credibility of the actuarial
profession is in question.
Possible Causes
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The unforseeable
Inadequate corporate
governance
Weak practice
Inadequate tools
No allowance for
contingencies
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Poor pricing
Insufficient standards
Lack of experience
Implicit discounting
Lack of clarity in the
meaning of “reasonable”
Possible Solutions
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Increase the experience requirement to 7 years
Actuary meet regularly with audit committee,
with and without management and/or audit
committee get an outside opinion
Signing actuary certify to SEC similar to
CEO/CFO cert but limited to gross/net
reserves
Create case studies for continuing ed
Possible Solutions
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Provide more backbone to the actuary
Require 2 signatures
 Change standard: anything less than actuary’s best
estimate is unreasonable
 Develop a public track record
 Automatic ABCD investigation when development
exceeds a threshhold
 Require peer review
 Require a risk margin
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Possible Solutions
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Increased disclosure
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Provide entire distribution of possible results
describe potential risks/uncertainties in detail with
quantification
more meaningful disclosure with less use of “boilerplate”
language
make actuarial report a public document
disclose contingent liability
copy of actuarial report to each board member
actuary to discuss prior MD&A
opinion to include display of booked vs. actuarial point
estimate or range $ or %
Possible Solutions
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Educate the public about “ranges”
Require an explanation of prior development in
SAO
Better education for reserving actuaries