Background:
Assuming we are reviewing the IBNR claims reserves of Company A using methods like chain
ladder applied to incurred claims. The review indicated that A not only did not require any
IBNR reserves, the central estimates of the IBNR reserve were negative. This can happen if
the company's case reserves are very conservative.
The company has the following alternatives:
1. Leave the existing IBNR and redundancy in case reserves untouched.
2. Release the existing IBNR reserve, and leave the redundancy in case reserves untouched.
3. Release BOTH the existing IBNR reserve and the redundancy in case reserves. A can do
the latter (ie reduce the case reserves) by :
a) reviewing the reserves on existing claims files and reduce those that the claims manager
feels is redundant. This would affect the development patterns on incurred claims - the actuary
would have to rely more on techniques applied to paid claims in future.
b) another option: allow the accounts to hold a negative IBNR reserve. which would avoid
having to change the present claims management approach.
I am looking for feedback on the feasibility of option 3, AND if there are better alternatives to
(a) and (b) assuming company A wishes to release the additional reserves (both the existing
IBNR and redundancy in case reserves).
Thanks in advance.
Visit the CAS Web Site at http://www.casact.org
===============================================
To subscribe or unsubscribe from CASNET:
Send an e-mail to caslists@lists.casact.org
Type in the body join casnet to subscribe
or leave casnet to unsubscribe.