Completing and Using Schedule P

Schedule P is a complex section of the Annual Statement, demanding much expertise to complete and to understand. The cross checks performed by the NAIC compare the Schedule P figures within its various parts, with other pages of the Annual Statement, and with Schedule P data from the preceding year. The NAIC uses Schedule P Summary data for three of the Insurance Regulatory Information System (“IRIS”) tests, and it uses the detailed line of business data to determine the reserving risk and the written premium risk charges in the risk-based capital formula. Investment analysts and rating agencies use the schedule to measure the adequacy of a company’s held reserves and thereby estimate its financial strength and expected market value. The IRS uses the schedule to determine loss reserve discounts, anticipated salvage and subrogation, and the discounts for anticipated salvage and subrogation. Actuaries and accountants need a thorough understanding of this Schedule, both to complete it for their own company or client and to evaluate the performance of peer companies.