-
Larger insurers underwriting numerous and sizeable classes of business are likely to require the services of more than one actuary to assess the value of Outstanding Claim Liabilities and Premiums Liabilities as well as the risk margins. In these circumstances, the Approved Actuary has responsibility for coordinating the valuations and summarising the results into one opinion for delivery to the insurer’s Board and senior management.
-
In preparing the summary opinion for the insurance liabilities for the company, the Approved Actuary should be satisfied as to the suitability of central estimates, risk margins and diversification benefits prepared by other actuaries for inclusion in the opinion. Where the Approved Actuary is not satisfied as to the suitability of a particular item for inclusion in the opinion, then an alternative figure is to be provided. Justification for varying the figure from the original is to be included in the summary report.
-
While the assessment of central estimates for Outstanding Claim Liabilities and Premiums Liabilities, uncertainty and risk margins for various classes of business in isolation is a relatively independent exercise capable of delegation to separate actuaries, the assessment of diversification benefits for the company is unlikely to be. The Approved Actuary is responsible for ensuring that the diversification benefit is assessed on a holistic basis for the company.
-
Some forms of reinsurance may be dependent upon the aggregate claim experience of a number of classes of business. Where an actuary is undertaking the valuation of classes of business completely encompassed by such a reinsurance arrangement, then the impact of the reinsurance on the central estimate of Outstanding Claim Liabilities and risk margin should be considered and included as part of the report. Where separate actuaries are valuing classes of business within such a reinsurance arrangement, it is the responsibility of the Approved Actuary to ensure that the impact of the reinsurance arrangement on the central estimates and risk margins is appropriately assessed and documented.
-
In order to meet reporting deadlines for published accounts, it may be necessary to invert the natural sequence and determine diversification adjustments before the individual classes of business valuations are completed. It will normally be acceptable for individual portfolio reports to show risk margins based on analysis of diversification benefits at the most recent previous valuation. If this is done, the continued appropriateness of those adjustments should be discussed.