Considerations Regarding Standards of Materiality in Estimates of Outstanding Liabilities

This paper reports on our research into the issues associated with establishing standards for materiality associated with claim liability estimates. In our research we explored several alternative methods for developing benchmarks for materiality. Rather than restrict ourselves to theoretical considerations, we tested the various methods empirically using public data for individual companies and various lines of business. The empirical test results raise many practical issues that must be considered in such an exercise. This paper is meant to promote discussion on this topic and related issues.