Property and Casualty Practice Note December 2008 For item 6, the response “Not Applicable” is intended to be used only in the situation of a company with 0% participation under an intercompany pooling agreement. If the actuary reaches different conclusions regarding net reserves versus gross reserves (direct plus assumed reserves), then item 4 in Exhibit B ordinarily would reflect the opinion category for net reserves. If the loss and/or loss expense reserves on the Liabilities, Surplus, and Other Funds page, loss and loss adjustment expenses lines are discounted, then the underwriting and investment exhibit is completed net of discounting. Disclosures regarding discounting of tabular and non-tabular reserves are made in the notes to the financial statements; additional disclosures regarding discounting of non-tabular reserves are made in Schedule P, Part 1. If loss and/or loss expense reserve discounting is handled through a separate contra-liability item on the Liabilities, Surplus, and Other Funds page, the actuary may choose to reflect this discount in the reserves on which the opinion is given. Disclosure 10 is the sum of voluntary and involuntary participation in underwriting pools and associations. A zero entry would be unusual for workers’ compensation or automobile insurers. The actuary may choose to show the voluntary and involuntary participation separately in the body of the SAO. Disclosure 10 normally would not include reinsurance assumed from a pool by a company that is not a participant in the pool but rather provides reinsurance protection for the pool’s participants. Schedule P Interrogatory No. 1 relates to yet-to-be issued Extended Reporting Endorsements (ERE) arising from Death, Disability, or Retirement (DDR) provisions in Medical Professional Liability Claims Made insurance policies. The amount of DDR reserves included in the company’s Medical Professional Liability net loss and loss expense reserves, and disclosed in Schedule P Interrogatory 1.6, would be included as “extended loss and expense reserve” in Exhibit B, Disclosure 12.1. DDR provisions reported as unearned premium reserves, and included in Schedule P Interrogatory 1.2, would be included in Exhibit B, Disclosure 12.2. It is important to note that the scope of the actuary’s opinion includes the amounts of extended loss and expense reserves reported in Disclosure 12. If such amounts are material in relation to the aggregate of the loss and loss adjustment expense reserves, the actuary may wish to consider the use of estimation techniques appropriate to this reserve. Exhibit B typically would contain information and amounts for all of items 1 through 13, even if the company’s value for an individual item is $0. Also, if the actuary is including a value in item 13, then the opinion would normally include, within a RELEVANT COMMENT paragraph, an explanation of why that value is being included in the Exhibit B disclosure.
DISCUSSION – INTERCOMPANY POOLING ARRANGEMENTS As directed by Section 1C of the Instructions, pursuant to an intercompany pooling agreement in which the lead company retains 100% of the pooled reserves and the other pool participants each retain 0%, Exhibits A and B should reflect values specific to the individual company, and PN08
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