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Managing A Loss Reserving Department and Communicating Results

Learn the essential steps for managing a loss reserving department effectively. Discover key strategies for defining tasks, staff, data, process, and communication of findings. Ensure successful communication with stakeholders through clear and concise reports.

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Managing A Loss Reserving Department and Communicating Results

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  1. Managing A Loss Reserving Department and Communicating Results Patrick N. Tures Vice President Actuarial & Strategic Information

  2. You want to manage the department which calculates loss reserves? You sure?

  3. The right approach will take you the distance…safely.

  4. Managing Loss Reserving • Fully Define the Task At Hand • Begin with the end in mind, and then map the route • Organic process, will change with each review • Goals/Objectives • Indicated reserves/adequacy position • Annual Statement needs • Statement of Actuarial Opinion • Allocation of reserves • Working document for interaction with rating agencies

  5. Managing Loss Reserving • Three Cornerstones • Solid Staff • Well balanced skill sets • Diversity of actuarial knowledge and experience • Character: ethical & non-territorial • Solid Data • It is imperative to reconcile with accounting data • Credibility vs. Homogeneity • It is vital to recognize the input of the claim and underwriting disciplines as a data source for each review. • Solid Process • Automated – but exterminate the “goldbugs” • Efficiency and flexibility are silent pillars of success

  6. Managing Loss Reserving • More Key Points on Process and Data • Proper Documentation • Flow chart with all data sources • Maintain a log of data and/or analysis anomalies • Controls • Balancing to accounting systems should be clear • Dates (Closing dates of different systems, etc.) • Tools • Reserving package (ReservePro) offers all the traditional approaches and simplifies maintaining data. • In-house development tailors the exercise to the needs of the organization. • Methodology and “Groups of Data” • Start with what is best for the reserve answer • If more detail is needed, allocate

  7. Well…tell me, is it enough? It is enough...right?

  8. Communicating the Findings • Bringing all of the work together into a formal, written, reserve report facilitates a coherent, readable distribution of findings. • Numerical exhibits should be subject to extreme scrutiny: • For actuaries, a complex exhibit is a work of art. • For everyone else, it is a thorny tangle you wouldn’t want to touch even with gloves on.

  9. Communicating the FindingsWho Needs to Know What? • Board of Directors • One page CLEAR numeric summary of reserve adequacy • Short written summary putting the numerical summary into words should accompany the numerical report • Full reserve report should made available

  10. Reserve Adequacy Summary

  11. Communicating the FindingsWho Needs to Know What? • Executives/Reserve Committee • Board of Directors’ exhibits • Results Segmented Between Actual and Expected • Detailed Claim Analysis • Formula IBNR implications • Nagging Issues such as asbestos and mold.

  12. Actual v. Expected

  13. Communicating the FindingsWho Needs to Know What? • Underwriting Management • No need to communicate the overall reserve position of the company • Ultimate Loss Ratios • Highlight changes and drivers where applicable

  14. Communicating the FindingsWho Needs to Know What? • Claim Department • Detailed Claim Analysis • Delineate between pure IBNR development and case movements • Demonstrate frequency and severity trends simply, clearly • Tracking Loss Development • Which claim types are moving? • Hone in on changes in older years.

  15. Pure IBNR v. Case Development

  16. Frequency Trends

  17. Severity Trends

  18. Development Tracker-1

  19. Development Tracker-2

  20. Development Tracker-3

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