Fall 2017 #22
When we are giving our opinion, do we give 2 individual opinions on both net & gross and leave it at that? Or do we state (for this example) that net reserves are reasonable, gross reserves are deficient by $20M, and then give a general opinion regarding overall reserve adequacy?
It seems like the examiner's report was fine just talking about net & then gross individually.
Comments
It's fine to provide an opinion for the net reserves separately from the gross reserves. (I'm not really sure what an "general overall opinion" would be based on.)
For this question, part b, the examiners report says that reasonable should be the given opinion in Exhibit B since the net reserves are reasonable and they are the more applicable estimate when dealing with reality (more or less).
My question is this, could this question be modified to include information about the reinsurers involved and if it were highlighted in the question that said reinsurers had solvency concerns, would it be fair to argue for an inadequate opinion in Exhibit B, on the basis that because of the concerns regarding reinsurers, the gross reserves being inadequate is more relevant, or would giving an opinion based on the net reserves still be the correct option?
I think it would depend on how much information you're actually given about the reinsurers but here are my thoughts:
Another option is this:
I would be hesitant to give an inadequate opinion unless there was strong evidence that the combined effect of net reserves and weak reinsurers made the opinion of inadequacy very clear.
That makes sense. Thank you for the response!