Property and Casualty Practice Note December 2011 or The company is the lead company of the XXX Insurance Group pool. The majority of the business written by the XXX Insurance Group is ceded to company A, company B, and company C and then pooled with the other four pool members: company D, company E, company F, and company G. Loss and loss-expense reserves for the total pool were analyzed in the aggregate for all pool companies and allocated to the pool companies based on their pool percentages. Any favorable or adverse development will affect pool members in a manner commensurate with their pool participation. If all business in the affiliated companies is part of the pooling agreement, the reconciliation of data to Schedule P, Part 1 can also be performed on a pooled basis. The actuary may wish to comment on this along the following lines when discussing reconciliation: I also reconciled that data to a composite Schedule P – Part 1, comprising the total intercompany pool to which the company belongs. 2
Intercompany pooling agreements may create substantial cessions on Schedule F between members of the pool. A change in pooling percentage can cause a company to fail IRIS Tests, particularly the Estimated Current Reserve Deficiency to Surplus.
3
If the composition of the pool, or a company’s share of the pool, changed materially during the current year, the actuary may wish to comment on this by describing the change.
The Actuarial Opinion Summary and Intercompany Pooling: In cases of intercompany pooling, the actuary often performs his or her analysis and draws his or her conclusions on the basis of total reserves. This information is usually described within the opinion. Though it is not required, the actuary may wish to consider showing the point estimate and/or range of estimates and carried reserves for the total pool, in addition to the amounts for the individual company, within the AOS. However, special considerations apply to non-lead companies under an intercompany pooling arrangement in which the lead company retains 100 percent of the pooled reserves. The AOS for those non-lead companies (0 percent pool participants) is to include a statement that the company is a 0 percent pool participant, and, for that non-lead company, the information provided for paragraph 5 is to be that of the lead company.
74 Š 2011 American Academy of Actuaries
Appendix 6 Intercompany Pooling