Our typical reserve evaluation provides a central estimate of our client’s ultimate and outstanding losses, including IBNR as of a particular evaluation date, such as fiscal year end. Our analysis relies on our client’s own historical experience for loss development and trends to the greatest extent possible. The analysis also takes into consideration the historical retention for each exposure. To the extent that data are not fully credible or available for certain aspects of the analysis, we would supplement data with industry statistics.
Our studies provide an estimation of the statistical variability inherent in the actuarial estimates, providing for projections at various confidence levels. Provision of estimates at other than expected will allow our client to evaluate the variability inherent in the estimates. While the central estimate provides an adequate basis for funding, clients wishing to reduce the potential for adverse results should consider including a risk margin. The choice of risk margin is dependent upon the client’s risk tolerance, and the size of the retention.
All of Select Actuarial Services’ studies include an illustration of the current experience in comparison with the expected loss development based on the previous analysis. This “comparison page” serves as a check of reasonableness of the selected ultimate losses and helps pinpoint the reasons for changes in estimates from one year to the next. This is particularly helpful when you are changing actuaries – we can make sure that changes to the selected ultimate losses are truly due to changes in experience.
Another helpful feature of our studies is the projection of the reported and paid losses to future points in time (monthly, quarterly). Many of our clients use these projections to gauge how their experience is tracking relative to expectations and to avoid surprises when it comes time to do their actuarial study.
In addition to providing the reserve analysis, we stand ready for those situations where an Appointed Actuary is needed and Statements of Opinion are required by state and off-shore domicile regulators.