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Class for Regional Affiliates on Testing Assumptions Underlying Estimates of Loss Reserves

Actuaries are challenged as never before to test the assumptions that underlie estimates of loss reserves. This class was designed by a task force of the CAS’s Committee on Theory of Risk (COTOR) to offer a meaningful one-day learning experience on testing assumptions underlying estimates of loss reserves. It is designed so that regional affiliates can host the class with a minimum of planning and coordination.

The class is designed to be facilitated rather than taught, so that all of the expertise of the participants will shed light on ways to test assumptions underlying estimates of loss reserves. Regional affiliates are encouraged to invite a diverse group to attend, from college students to Chief Actuaries. Members of actuarial, accounting, and IT departments should attend. In a nutshell, the class material works from the assumption that a group of 15 to 30 professionals knows what to do even though no one person in the room is an expert. The facilitators, using material supplied by COTOR, help the participants to explore and share thoughts, ideas, methods, and experiences.

Given that the class is designed for facilitated learning, regional affiliates are responsible for recruiting two facilitators rather than one teacher. The design assumes that neither facilitator will be an expert in all topics covered by the class. COTOR has provided guidance about the nature of facilitated adult learning to help the regional affiliates recruit facilitators.

The class draws on basic skills with Excel, linear regression techniques and testing, and the loss reserving problem in the context of “loss development triangles.” The class had one “beta test” at a large regional affiliate in the summer of 2007. Feedback from that experience was that the class would be more useful if it were recast as a traditional teaching situation, including students of similar backgrounds and teachers that had particular expertise in the subject. At this time, COTOR feels that this recommendation may not be helpful for regional affiliates that are not large enough to attract a classroom of similar students and teachers with expertise in the subject. COTOR continues to seek feedback from regional affiliates regarding this and welcomes all other observations and recommendations.

The class is designed so that most participants can commute to the host facility in the morning and return home that same evening. The material suggests two optional early morning sessions, one introducing the topic of regression and one introducing the loss reserving problem. Offering these classes may encourage participation from accountants and college students who otherwise might not sign up.

To learn more about the purpose and scope of the class and how your regional affiliate can schedule a class, please continue below.

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The CAS Roundtable

Posted on 02/14/2018
By Daniel Johnston

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