Allocation of Reserves

The primary reserve problem for an insurance company is the determination of an overall reserve estimate. However, it is often necessary that reserve estimates developed at a corporate level be allocated to sub-units of the company. Some common allocation situations involve the distribution of reserves to profit center, to state, or to agent. Since operational decisions often involve these types of sub-units, the quality and accuracy of reserve allocations is very important. This session explores the methods that can be used for allocating reserves. The panel will focus their discussions on the application of particular methods in a corporate environment: why they were chosen, how successfully they worked, and the various problems – both actuarial and non-actuarial – that were encountered.