25 Years Ago in The Actuarial Review

by Walter C. Wright

Newer members may be surprised to learn that 25 years ago there was a debate about who should sign loss reserve opinions. The following article from the July 1978 issue of The AR discusses the Academy's response to an NAIC Subcommittee that had recommended that both actuaries and CPA's should be considered qualified to sign the opinions.

July 1978 AR (.pdf)

Academy Insists Only Actuaries, Not CPA's, Sign Reserve Opinions

But NAII Seeks to Broaden Definition of Qualified Reserve Specialist
'Qualified loss reserve specialist' as used here means a member in good standing of the American Academy of Actuaries, the Casualty Actuarial Society, or a person who has otherwise demonstrated his or her actuarial competence in loss reserve evaluation to the satisfaction of the insurance regulatory official of the domiciliary state."

Those were the words recommended by the American Academy of Actuaries as a substitute for the definition of a qualified reserve specialist offered by the NAIC (A5) Subcommittee in its draft proposal for mandating an actuarial opinion on loss reserves in annual statements beginning with l979. The (A5) Subcommittee, of which Fletcher Bell of Kansas is chairman, had proposed that members of the AICPA also be recognized as qualified….

The Academy pointed out the difference between the actuarial and accounting functions in an insurance company, stating that the accountant is trained in the presentation of historical transactions, whereas the actuary is trained to evaluate the current financial effects of future transactions. The Academy said it believed the (A5) Subcommittee was concerned about the latter of the two functions….

The Academy also questioned the appropriateness of the loss reserve confidence ranges that the (A5) Subcommittee draft had suggested be recognized in the signed opinion. The state of the art in actuarial technology is not at the stage where methods of applying confidence intervals in the establishment of reserves can be effectively applied. However, usable techniques in this area are desirable, the Academy said, and the actuarial profession is focusing attention on the problem.