ASOP.20

ASOP 20, Discounting of Property/Casualty Unpaid Claim Estimates, provides guidance to the actuary related to services involving discounting of unpaid claim estimates for P&C coverages.

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Based on past exams, the main things you need to know (in rough order of importance) are:

• 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!

Question: given an undiscounted reserve estimates, what components are required to calculate the corresponding discounted reserve

• payment pattern (recoverables should be considered when developing a payment pattern)
• discount rate

Question: briefly describe 3 possible methods for selecting a discount rate

risk-free rate:

   - this is the rate of return from a hypothetical investment with no risk

   - in practice it would be the rate of return for a very low risk investment with a timing pattern similar to the payment pattern for the given reserve liabilities

portfolio yield:

   - this is the average yield on investments within a selected asset portfolio

   - this method provides better matching of liabilities & assets (assuming the timing of asset earnings match the payment pattern of the reserve liabilities)

selection by another party:

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