Provisions for Adverse Deviations - Property and Casualty Insurance Companies

"This standard of practice applies to members [of the Canadian Institute of Actuaries] who are valuing the policy liabilities of a property/casualty insurance company operating in Canada, domestic or foreign.” The standard outlines the determination of a risk margin for policy liabilities. The risk margin is dependent on the variation of claims development, reinsurance recoveries and the interest rate. For claims development, a factor is multiplied times outstanding claims to increase them. For reinsurance recovery, a factor is multiplied times ceded outstanding claims recoverable to decrease them. For the interest rate variation, the interest rate for discounting liabilities is decreased by subtracting a factor. The situations causing variation in these variables are described, as well as the resulting recommendations for the factors. KEY WORDS: Canadian Issues, Claim Settlement Lags, Data, Reserving, Discounting, Exam Part 7/7C, Investments, Payment Patterns, Reserving, Reinsurance Ceded, Risk Margin, Standard of Practice, Valuation Actuary.