Report on Reserve and Underwriting Risk Factors

One of the components of the proposed Property & Casualty Risk-Based Capital formula is reserve and underwriting risk factors. The American Academy of Actuaries Property & Casualty Risk-Based Capital Task Force has prepared the following report on these risk factors and recommended them to the NAIC P&C Risk-Based Capital Working Group. The Task Force recognizes that the measurement of risk is an emerging area of thought and technology. The Task Force views this report as a good foundation for further study of this critical issue, and not as the "definitive word" on the subject. Hopefully this report will stimulate further study of and papers on this subject. Another component of the formula is covariance. Also included here is a report on this topic to the Working Group.