1 125. A PUBLIC POLICY PRACTICE NOTE. Statements of Actuarial Opinion On Property and Casualty Loss Reserves 2018. Developed by The Casualty Practice Council's Committee On Property and Liability Financial Reporting 2018 American Academy of Actuaries. All rights reserved. A PUBLIC POLICY PRACTICE NOTE. Statements of Actuarial Opinion on Property and Casualty Loss Reserves 2018. Developed by The Casualty Practice Council's Committee On Property and Liability Financial Reporting The American Academy of Actuaries is a 19,500+ member professional association whose mission is to serve the public and the Actuarial profession. For more than 50 years, the Academy has assisted public policy makers on all levels by providing leadership, objective expertise, and Actuarial advice on risk and financial security issues.
2 The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States. Committee on Property and Liability Financial Reporting (2018). Kathy Odomirok MAAA, FCAS, Chairperson John Pierce MAAA, FCAS, FCA, Vice Chairperson Ralph Blanchard MAAA, FCAS. Jeff Carlson MAAA, FCAS. Kevin Christy MAAA, FCAS. Tom DeFalco MAAA, FCAS. Rob Flannery MAAA, ACAS. Derek Freihaut MAAA, FCAS. Brandon Gilbert, MAAA, FCAS. John Gleba MAAA, FCAS, FCA. Susan Gozzo Andrews MAAA, FCAS. Lise Hasegawa MAAA, ACAS. David Heppen MAAA, FCAS. Stephen Koca MAAA, FCAS. George Levine MAAA, FCAS. Mary Frances Miller MAAA, FCAS, HONFIA. Rodney Morris MAAA, FCAS.
3 Jay Morrow MAAA, FCAS. Judy Mottar MAAA, ACAS. Carver Roya, MAAA, FCAS. Chet Szczepanski MAAA, FCAS. Glenn Tobleman MAAA, FCAS, FCA. Marc Rosenberg, Senior Casualty Policy Analyst 1850 M Street NW, Suite 300. Washington, DC 20036-5805. 2018 American Academy of Actuaries. All rights reserved. Property and Casualty Practice Note 2018. Table of Contents 1. Introduction .. 7. What are practice notes? .. 7. Purpose of this practice note .. 7. Scope of practice note .. 9. Overview of resources .. 10. Organization of this practice note .. 12. Changes from the 2017 practice note .. 12. 2. IDENTIFICATION section .. 13. Appointment of the Qualified 14. 16. Change in Appointed Actuary.
4 20. 3. SCOPE 21. Scope of SAO .. 21. Stated basis of presentation .. 23. Intercompany pooling .. 24. Review date .. 26. Provider of data relied upon by the Appointed Actuary .. 28. Evaluation of data for reasonableness and consistency .. 28. Reconciliation to Schedule P .. 30. Data testing 33. 37. 4. Opinion section .. 39. Meet the relevant state laws .. 40. Accepted Actuarial standards and principles .. 41..Reasonable 42. Inadequate/deficient Opinion or excessive/redundant Opinion .. 44. Qualified Opinion .. 46. No Opinion .. 48. Other Loss Reserve items .. 50. UPR for P&C Long Duration Contracts .. 51. Other Premium Reserve items .. 53. 2018 American Academy of Actuaries 4 Property and Casualty Practice Note 2018.
5 Use of the work of another .. 54. 5. RELEVANT COMMENTS section .. 56. Materiality standard .. 57. Company-specific risk factors .. 59. Risk of Material Adverse Deviation .. 61. Anticipated salvage and subrogation .. 64. 65. Voluntary and/or involuntary underwriting pools and associations .. 66. A&E liabilities .. 68. Retroactive reinsurance .. 74. Financial reinsurance .. 77. Uncollectible reinsurance .. 79. IRIS Ratios .. 83. Changes in methods and assumptions .. 85. Extended reporting endorsements .. 87. Property and Casualty (P&C) Long Duration Contracts .. 90. Accident and Health Long Duration Contracts .. 92. Other Items .. 93. 6. Additional considerations.
6 95. Formatting requirements .. 95. Errors in SAOs .. 97. 7. Actuarial Opinion Summary .. 100. Filing the AOS .. 100. Content of the 102. Sample formats of the AOS .. 105. AOS for pooled companies .. 107. Errors in the AOS .. 108. 8. Actuarial Report .. 110. Actuarial Report requirements per the NAIC SAO Instructions .. 110. Long-Term Care and A&H Long Duration Contracts .. 112. Description of Appointed Actuary's relationship to the company .. 113. Exhibit comparing Appointed Actuary's conclusions to carried amounts in Annual Statement . 114. Reconciling and mapping data in the Actuarial Report to Schedule P .. 115. Exhibit and discussion on change in Appointed Actuary's estimates.
7 117. Extended comments on risks and uncertainties .. 118. 2018 American Academy of Actuaries 5 Property and Casualty Practice Note 2018. Extended comments on unusual values for IRIS Ratio 11, 12, and/or 13 .. 119. 9. Resources .. 121. Applicable ASOPs .. 121. Applicable SSAPs .. 122. Available resources for opinions not covered by this practice note .. 123. APPENDICES .. 124. I. 2018 NAIC Instructions .. 125. II. 2018 AOWG Regulatory Guidance ..49. III. Special interest topics .. 166. An Overview for P/C Insurers' Audit Committees: Effective Use of Actuarial Loss Reserves Expertise .. 179. IV. SSAPs .. 192. 2018 American Academy of Actuaries 6 Property and Casualty Practice Note 2018.
8 1. Introduction This practice note is not a promulgation of the Actuarial Standards Board, is not an Actuarial standard of practice, is not binding upon any actuary and is not a definitive statement as to what constitutes generally accepted practice in the area under discussion. Events occurring subsequent to the publication of this practice note may make the practices described in this practice note irrelevant or obsolete. This practice note was prepared by the Committee on Property and Liability Financial Reporting (COPLFR) of the Casualty Practice Council of the American Academy of Actuaries (Academy). What are practice notes? The Academy's Guidelines for Developing Practice Notes 1 states: The purpose of practice notes is to provide information to actuaries on current or emerging practices in which their peers are engaged.
9 They are intended to supplement the available Actuarial literature, especially where the practices addressed are subject to evolving technology, recently adopted external requirements, or advances in Actuarial science and other applicable disciplines.. Practice notes are not interpretations of Actuarial standards of practice nor are they meant to be a codification of generally accepted Actuarial practice. Actuaries are not bound in any way to comply with practice notes or to conform their work to the practices described in practice notes. 2. Discussion Practice notes provide discussion and illustration on areas of common practice among actuaries. Each practice note focuses on a specific topic or application of practice.
10 As noted in the Academy's guidelines, practice notes are not intended to be an interpretation of the Actuarial standards of practice, nor are practice notes meant to be a codification of generally accepted or appropriate Actuarial practice. Actuaries are not in any way bound to comply with practice notes or to conform their work to the practices they describe. Purpose of this practice note 1. The purpose of this practice note is to provide information to actuaries on current practices in which their peers are engaged related to signing a Property and Casualty Statement of Actuarial Opinion (SAO) and Actuarial Opinion Summary (AOS) as required by the National Association of Insurance Commissioners (NAIC).