Discounting of Loss Reserves in the Property and Casualty Insurance Industry Phase II

The Insurance Bureau of Canada (IBC) issued its report “Discounting of Loss Reserves in the Property and Casualty Insurance Industry” on September 14, 1990. This report made several recommendations concerning further work required. The IBC formed a sub-committee to follow-up on these recommendations. Its mandate was to examine the financial impact of discounted loss reserves on statutory accounting and on solvency of insurance companies using modeling techniques and the current standards of practice of the actuarial and accounting profession. This is the report of that subcommittee. The report outlines the impacts of discounting on reserves, surplus, taxes, assets, and financial reporting. As a result of the findings of this committee, the IBC concluded that the adoption of discounting of loss reserves for financial reporting purposes would produce no tangible benefits, and in fact, could be detrimental. KEY WORDS: Accounting, Financial Reporting, Statutory, Canadian Issues, Actuaries, Exam Part 7C, Discounting, Taxes.