ASOP43.UnpaidClmEst

Reading: Actuarial Standard of Practice No. 43, Property/Casualty Unpaid Claim Estimates

Study Tips

Forum   ASOPs generally have these sections:

Section 1. Purpose, Scope, Cross References, and Effective Date

Section 2. Definitions

Section 3. Analysis of Issues and Recommended Practices

Section 4. Communications and Disclosures

Appendices

Sections 3 & 4 contain most of the relevant information. The definitions in Section 2 are usually obvious and familiar, and are covered in either the Werner of Friedland source texts anyway. You can skip Section 1 and the Appendices. The appendices usually contain either very general background information or comments on the draft version of the ASOP.

Estimated Study Time: 30 minutes (you may occasionally refer back to this ASOP while studying the main pricing and reserving material)

BattleTable

• this reading has not been tested on any exam from the year 2012 and subsequent

reference	part (a)	part (b)	part (c)	part (d)
no prior questions

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In Plain English!

Section 2: Definitions

The terms defined in this section are all very obvious but there's one that might be worth memorizing:

unpaid claim estimate: the actuary’s estimate of the obligation for future payment resulting from claims due to past events

Section 3: Analysis of Issues and Recommended Practices

This section in ASOP 43 contains several detailed lists and sub-lists of issues to be considered when doing a reserve analysis. Much of it is covered incidentally in the main pricing and reserving material. For that reason, I would suggest spending very little time here. If you want, you can print out the source text and use it for bedtime reading.

Just to give you brief idea however, these are a few of the things that are mentioned as considerations when doing a reserve analysis:

• purpose of analysis (Ex: internal management or external financial reporting)
• limitations (lack of credible data or shortage of staff to perform analysis)
• understanding the coverages and other relevant data items (is the data net/gross of reinsurance, net/gross of salv/sub)
• selecting methods appropriate to the characteristics of the data

Those are all pretty obvious.

Section 4: Communications and Disclosures

This section on communications & disclosures is largely common sense. Regarding the unpaid claim estimates, the actuary should communicate information that may have a material impact on the user's interpretation. Examples of such items include but aren't limited to:

• intended user
• scope of the unpaid claim estimate
• limitations of the analysis (maybe a particularly sensitive component requires a more in-depth analysis)
• significant events (that may have had a material impact on the results)

Note that many of these same considerations apply to actuarial communications in general.

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