Workers Compensation Reserve Uncertainty

Actuaries have developed a host of techniques for producing point estimates of indicated reserves. Current regulatory concerns, as reflected in the NAIC’s risk-based capital requirements, and developing actuarial practice, as reflected in the American Academy’s vision of the future role of the Appointed Actuary, now stress the uncertainty in the reserve estimates in addition to their expected values. This paper demonstrates how the uncertainty in property-casualty loss reserves may be analyzed, and it draws forth the implications for capital requirements and actuarial opinions. Keywords: Risk-Based Capital