When you say "allocate by reserves" do you mean you pro-rate existing
surplus using booked reserves as weights? If so, and assuming your
products do not correspond one-to-one with annual statement lines of
business, then would I be correct in stating that you are using internal
sources that feed the annual statement to split reserves by product
segment? Are you compelled to share this information with the regulators
in order to justify your allocations?
Also, what do you do for product lines that are growing, where the
reserves may be less indicative of capital needs?
Dan
daniel.roth@cna.com
----------
From: SMMUSA1
To: casnet@lists.casact.org
Subject: Re: Allocation of Surplus to individual lines
Date: Tuesday, June 23, 1998 12:13PM
Sebastian,
For what it's worth, I allocate by reserves on a company wide basis for
all
states ex. Washington. For the state of Washington, I go deeper and
allocate based on WA's reserves. My WA model is not by choice, the WA
DOI
has companies allocate based on their WA reserves.
Charlie
----------
From: Sebastian Tan <sebtan@singnet.com.sg>
To: Discussion <casnet@lists.casact.org>
Subject: Allocation of Surplus to individual lines
Date: Friday, June 19, 1998 12:44 AM
It is common for actuaries to price their products to achieve a
particular
return on equity (or surplus). However this requires a notional
allocation
of surplus to individual lines of business. This is still a
controversial
topic. It would be interesting to know what is currently practised in
the
insurance industries in the USA, UK, Canada and Australia. If you are
currently involved in premium rating, I hope you would share your
experiences:
Do you use a simple approach (in proportion to premiums or reserves) in
the
allocation process or do you use something along the lines of Risk-Based
capital or some other approach?
Thanks in advance,
Sebastian
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