Work of others: Effect of variations in other person's estimates on appointed actuary's opinion
in COPLFR.SAO
Can we please get an explanation of "Effect of variations in other person's estimates on appointed actuary's opinion"?
(note this is the E item in P-NEC)
The corresponding source reading says "The way in which reasonably likely variations in estimates covered by another’s analyses or opinions may affect the actuary’s opinion on the total reserves subject to the actuary’s opinion;"
and why do we prefer the range estimated by other actuary to be as small as possible?
Thank you.
Comments
You would generally prefer the range estimated by others to be small so it has the least impact on the total reserves you are opining on. That's essentially what "effect of variations in other person's estimates on AA's opinion" is referring to.
Say you are the AA and you have come up with a range of reasonable reserves, and the carried reserves fall in that range and you plan to file a "reasonable" opinion. Easy and straightforward! But, you must rely on someone else's work for a portion of the reserves under the scope. That range is deficient. Depending on the magnitude of the reserves, you might have to change your opinion to deficient due to the variation in the other person's estimate.