SAO Practice Answers 2019-Spring

Questions Similar to 2019-Spring

Explain the importance of the appointed actuary's range in determining the adequacy of loss reserves.
How does the concept of material adverse deviation (MAD) influence the actuary's opinion in the Statement of Actuarial Opinion (SAO)?
Describe the role of reinsurance in the actuarial evaluation of a company's reserves.
What factors should be considered when assessing the adequacy of reserves for a new line of business?
Explain the significance of one-year development to prior year surplus in reserve analysis.

The range offers a spectrum of reasonable estimates, acknowledging inherent uncertainties in predicting future claims.
It aids in comparing the company's carried reserves against these estimates to assess adequacy.
A significant deviation from this range could signal financial instability or mismanagement.

MAD reflects potential significant negative developments in a company's reserves.
The actuary must evaluate whether there's a risk of MAD and disclose this in the SAO.
This assessment ensures transparency and prepares stakeholders for potential financial impacts.

Reinsurance affects reserve estimates by providing coverage for large or catastrophic losses.
It influences the net reserve requirements, as some risk is transferred to reinsurers.
Actuaries must consider both gross and net reserves, accounting for reinsurance recoverables.

Availability and reliability of data for estimating reserves, as new businesses might lack historical data.
The nature of risks involved and potential volatility in claims.
Regulatory requirements and market conditions specific to the new business line.

This ratio indicates how much reserves developed over the last year relative to the prior year's surplus.
High ratios suggest significant reserve volatility, which could impact financial stability.
It helps in understanding the company's ability to absorb reserve changes without affecting its financial health.