The American Academy of Actuaries and the Casualty Actuarial Society are both
interested in this issue (Y2K reserving). This interest led to the creation of
the CAS Y2K Work Group, chaired by Raja Bhagavatula, which I am a member of.
This group expects to produce a draft of a paper by the CAS Loss Reserving
Seminar in September, with a final version for the November CAS Convention.
As to what's available now on this subject, I am not aware of any unique Y2K
reserving techniques over than discussions about market share approaches.
(There will be a general session at the May CAS Convention in Orlando on this
subject, where a market share approach will be discussed.) Market share
approaches have to be viewed with caution, however, due to concerns with the
reliability of the resulting estimates. In additon, many in the accounting
profession will not accept an estimate based solely on market share (and an
industry-wide loss estimate), and will accept "market-share" approaches only in
support of methods based on a company's own data.
As to the triggers, this is a key leverage point when it comes to Y2K reserving.
There are many legal websites and/or publications that express opinions on this.
Many believe that most coverages would define the trigger as the date of
physical damage, not installation (or manufacture) of the offending product.
Some believe that courts (such as those in California) will always find a way
for the deep pockets to pay, no matter what the facts of the case or what logic
says. (Note, some courts have already dismissed suits against Intuit, the
manufacturer of Quicken, for remeditation costs, partly on the basis that
damages have yet to occur.)
As to the treatment for policies incepting on 12:01am on 1-1-00, good question.
I would like to get a discussion going on this, and the CAS Y2K Work Group tried
to get a discussion going on this topic on the CAS web site. Unfortunately,
many comments on the web site were tangential or emotional, with too few of the
comments focused on the technical issues at hand.
Feedback?
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.