Property and Casualty Practice Note December 2008 ASOP No. 36 requires disclosure of instances in which the actuary is unable to review the prior actuary’s work.
ILLUSTRATIVE WORDING CHANGE IN METHODS AND ASSUMPTIONS: The actuary may choose to use wording similar to the following: 1.
Material change due to distortions affecting old method A material change in actuarial methods was made in the analysis supporting this opinion. The change entailed using a reported loss development procedure in place of the paid loss development procedure used last year. This change was necessitated by the implementation of a new claim payment system, distorting the paid data but leaving unchanged the case incurred.
2.
Change made, materiality unknown A change in actuarial methods was made in the supporting reserve analysis (versus the prior year). The materiality of this change could not be determined. The change, developing auto liability losses with bodily injury and property damage combined rather than separated, was necessitated due to the implementation of a new claim system. The new system did not contain the data in the same detail as was available last year.
3.
Material change, old method found to be less accurate A material change in actuarial assumptions was made in the analysis supporting this opinion. The prior analysis used a method for determining a tail factor that now appears to be inappropriate. Instead, the new method used produces a tail more in line with historical claim development.
DISCUSSION-OTHER DISCLOSURES IN EXHIBIT B-DISCOUNTING AND SALVAGE/SUBROGATION: Actuarial opinions are normally prepared on the same basis with regard to discounting and anticipated salvage and subrogation as the disclosed basis for the carried loss reserves. The amount of discount is required by the instructions to be disclosed separately for tabular and non-tabular reserves. If the actuary is providing a SAO for discounted loss and loss adjustment expense reserves, the actuary can find guidance in ASOP No. 36 and ASOP No. 20, Discounting of Property and Casualty Loss and Loss Adjustment Expense Reserves.
PN08
21