SAO
I have few questions related to SAO.
What is the different between a qualified opinion vs a None opinion. I thought in both case, the AA is unable to make a conclusion.
Why Asbestos and Environmental is consider a risk factor? Could you give me an example on how it can affect the insurer?
Thank you
Comments
For a qualified opinion:
For example, suppose the reserves consisted of 2 lines of business where LOB1 had reserves of $950 and LOB2 reserves of $50. If the actuary reviewed LOB1 and agreed that $950 was the appropriate reserve but had only minimal information on LOB2, then he/she might issue a qualified opinion.
For a none opinion:
For example, suppose the situation above were reversed and the actuary had complete information about LOB2 and agreed the appropriate reserve was $50 but had only minimal information about LOB1, then he/she would likely issue a none opinion. This is because LOB1 is likely majority of the reserves. Nobody would care that the $50 reserve for LOB2 was accurate because it is so small in comparison to LOB1.
The reason asbestos is a risk factor is that asbestos was often used in buildings as a fire retardant but it can also cause severe respiratory diseases. There are many old buildings that contain asbestos so any insurer offering property/liability coverage may be exposed. Often nobody even knows if a building contains asbestos until a renovation is begun and the asbestos-containing material is disturbed. Someone who worked for 20 years in a building with asbestos and later develops cancer may sue the property owner and the owner may then make a claim against their insurer.
Thank you.
What is the difference between review date and evaluation date?
Is evaluation date 12/31 and review date information provided to me through such as 1/27 the following year ? Thank you.
The evaluation date (also called the valuation date) is the date the books close, usually Dec 31 if you're doing the annual statement. For example, any claims or premium transactions that occur on or before the evaluation date are included in the data triangles. Any transactions after that date are not included.
The review date is on or after the evaluation date. It is the date through which material information known to the actuary is included in forming the reserve opinion. For example, the review date might be Jan 27. An example of such information might be a subsequent event (like a hurricane) - something that happened after the evaluation date but before the report was issued. (The review date is discussed in Section 3.4 of COPLFR. It is a disclosure requirement for the Scope section of the SAO.)
Okay, thank you.