Discounting Claims of Insurance Enterprises

Examination of two main issues related to the discounting of insurance claim. The question of whether insurance enterprises should present incurred claims (and claim adjustment expenses) at the present value of anticipated net cash payments is discussed. The differences between life and property/casualty claims are presented, as well as the present discounting practices. The advantages and disadvantages of discounting are examined. In addition, the paper examines the issue the choice of interest rate to be used in determining the present value of losses and loss adjustment expenses. KEY WORDS: Exam Part 7/7C, Reserving - Discounting, Discounting, Financial Reporting.