Best practices and due diligence suggest that property/casualty insurance company boards of directors, often via their audit committees, should annually interview the actuary who delivers the company’s Statement of Actuarial Opinion about the loss reserving process.

Executive Summary

Members of P/C carrier boards of directors may not be leveraging a prime opportunity to mine information about the operational health of the company from actuaries who attest to the strength of carrier loss reserves. Here, a former chief actuary for the Pennsylvania Insurance Department offers a list of five questions they should routinely be asking.

These interviews necessarily focus on the integrity of the process. Unfortunately, given the affiliated constraints of short timelines, a necessary focus on the integrity of the process and the sometimes static nature of annual statements, there is often much information regarding the dynamic health of the insurance company that may not be leveraged sufficiently.

Actuaries who provide reserve recommendations and statements of opinion perform a substantial cadre of diagnostic tests and reviews. These tests and reviews span performance over time, line of business and often region. Such items as exposure growth, rate changes, claim frequencies and severities, claim settlement practices, as well as large claims and catastrophic events are monitored. These actuaries necessarily interview and interact with the underwriting, claims and financial staffs when reviewing and interpreting their diagnostics.

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