Re: Claims Reserves

Sebastian Tan ( david.ruhm@zurich.com )
Tue, 7 Oct 1997 13:30:46 -0500

There are other alternatives besides the three that are listed. The
IBNR could be reduced conservatively, not to zero, and the claims manager
could commence the claims review. Perhaps the nature of the business has
changed, and the case reserves are not as redundant as loss development
would indicate. If case reserving practices are changed, it is not
necessary to rely on paid methods - one can adjust incurred losses
appropriately before applying incurred methods. - David Ruhm

sebtan @ singnet.com.sg
10/08/97 01:24 AM

Please respond to casnet@lists.casact.org

To: casnet @ lists.casact.org
cc: sebtan @ singnet.com.sg (bcc: David Ruhm/UUG/USA/Zurich)
Subject: Claims Reserves

I am seeking opinions in the following area:
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.

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