OLD ULAE
We have no inside council, so all of our old ULAE is still Adjustment
Expense. Our reinsurance treaties haven't changed: we can consider for
cession anything we pay from the claim file, but none of the ULAE. We will
estimate this reserve just as before and report all of it as Adjustment
Expense.
OLD ALAE
Our claims system separates LAE into "Legal", "Adjustment Expense", and
"Other Expense". Claims department staff have been instructed to code
things associated with adjustment (including coverage opinions provided by
attorneys) to "Adjustment Expense". All costs associated with the defense
of claims will be coded to "Legal". Thus I have my split for reporting the
paid amounts in Schedule P. I could use this split data to estimate
reserves separately, but I'm fairly certain I would not realize an increase
in accuracy. I know I don't want to spend the extra time to look at another
set of triangles. I will have to split this reserve into two components for
reporting, and I plan to do that by examining historical IBNR emergence by
line separately for Adjustment Expense and Legal & Cost Containment.
To directly answer Mr. Tuttle's question: One set of books, but enough
accounts to keep the bureaus, NAIC, and reinsurers happy.
William S. Hedges
Oregon Mutual Insurance Company
voice: 503.434.3716
fax: 503.434.3845
> -----Original Message-----
> From: Jerry Tuttle [mailto:jtuttle@stpaulre.e-mail.com]
> Sent: Thursday, July 30, 1998 6:01 AM
> To: casnet@lists.casact.org
> Subject: ALAE/ULAE; How many sets of books?
>
>
>
> As I understand it, ALAE/ULAE are defined
> differently for: 1. NAIC annual statements, 2.
> bureau statistical plan reporting (where even the
> two major bureaus' definitions are not identical),
> and 3. reinsurance contracts (which are not
> required to use either of the first two definitions).
>
> The conscientious insurer should then be keeping
> several sets of books to satisfy each use of
> ALAE/ULAE. Does anybody really believe this is
> being done?
>
> Jerry Tuttle
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