Only 48 percent of property/casualty actuaries surveyed by Willis Towers Watson last year said they were fully satisfied with the accuracy and confidence of their reserving, the global advisory, broking and solutions company said last week.
Revealing the results of the firm’s “Current Trends in P&C Reserving Practices Survey,” Willis Towers Watson said the figure had dropped 15 percentage points compared with its previous reserving survey two years ago.
“The fairly dramatic decline in insurers’ full satisfaction with reserving accuracy and confidence may coincide with an inflection point in the reserving cycle,” said Joseph Milicia, P&C M&A practice lead for the Americas, Insurance Consulting and Technology, Willis Towers Watson, in a media statement, tying the lower comfort level to benign loss trends of the recent past. “Over the past decade, the industry’s bottom line has benefited from consistent reserve releases; the need to monitor for and respond to the eventual tempering of the benign loss trends that drove those releases may be behind this focus on accuracy,” he said.
Willis Towers Watson said that 54 actuaries with the title chief actuary or chief reserving actuary from leading U.S., Canadian and Bermudan P/C insurers participated in the 2016 survey.
Survey questions were organized into four categories: structure, process, reserving methodologies and interactions with other departments.
With regard to overall reserving process, less than one-third (30 percent) of respondents said they are fully satisfied with their processes, citing key person risk and limited time to perform detailed value-added analyses as their top concerns.
Asked about investment priorities related to the reserving process, consistent management reporting topped the list, with 41 percent of the actuaries citing this as a priority. Software moved up since a prior survey, Willis Towers Watson said, noting that 24 percent of respondents said they are planning significant investments in software, compared to just 15 percent two years ago.
“The focus on efficient use of resources and the increased importance of value-added processes are encouraging signs that reserving is readying to follow the industry’s process transformation trend,” said Milicia.
“On the other hand, innovation in operations, including claims handling, the evolution of products and changes in the nature of risks require going beyond traditional reserving techniques,” he said. “The reserve function may need to move faster to be prepared,” he concluded, observing that 35 percent of respondents reported plans to implement individual claims reserving methodologies—an example of nontraditional approaches.
“A robust, efficient and engaged reserving function can be a competitive advantage,” Milicia said. “Our survey shows encouraging signs but also areas for further work toward that goal.”
Source: Willis Towers Watson