Data

11. An actuary should be familiar with the administration and accounting procedures for policies and claims for the part of the company for which an opinion is required.

12. An actuary should be conversant with the characteristics of the insurance policies and claim processes that may materially impact upon the estimation of insurance liabilities. This may include familiarity with the:

(a) nature of coverage;

(b) underwriting strategy and the nature and mix of risks underwritten;

(c) benefits payable under policy terms or by virtue of legislation, including deductibles and limits; and

(d) reinsurance arrangements.

13. An actuary should also be familiar with economic, technological, medical, legal and social trends within the broader community that may impact upon the value of insurance liabilities.

14. It is an actuary’s responsibility to ensure that the data used gives an appropriate basis for estimating the insurance liabilities. This includes the insurer’s own exposure and claim experience data, but should extend to industry data, where the insurer’s own data is not sufficient to reduce uncertainty to an acceptable level. Where even industry data is sparse, it may be necessary to rely, to a greater or lesser extent, on subjective assessment. The appropriate compromise between the cost of better data and the benefit, in terms of more reliable estimation, is a matter for actuarial judgement, which should take into account the materiality of the reduction in uncertainty that might result.

15. An actuary should take reasonable steps to verify the consistency, completeness and accuracy of the data collated, against the company’s financial records. The degree to which an actuary relies upon the data provided by the company or upon earlier or later testing of the data by the company’s auditors, and the resulting limitations that this reliance places on the actuary’s confidence in the data, should be commented upon in the report.

16. In order to meet reporting deadlines, an actuary may be asked to value insurance liabilities as at a valuation date prior to the reporting date. It may be intended either to use this valuation as if it were at the reporting date, or to update it to the reporting date. Another approach is to develop a model based on analysis of data up to an earlier date, applied to data as at the valuation date. This practice is acceptable, provided that the actuary does not have reason to believe, on the basis of the data emerging since the full analysis, that a full valuation using more recent data would give significantly (in the technical statistical sense) different results. The actuary should comment in the report on any features of the subsequent data that might materially affect the result and quantify the difference.