Reserving for Catastrophes [Discussion]

The National Association of Insurance Commissioners (NAIC) has worked since the mid-1990s to facilitate pre-event tax-deferred catastrophe reserves. The proposal was adopted by the NAIC in 2001. The catastrophe reserve will not be a traditional liability reserve, nor will it specifically be included in the scope of the NAIC Statement of Actuarial Opinion on loss reserves. However, actual expertise will be needed to evaluate additions and drawdowns of the reserve. The reserve should be evaluated, along with additional information in the Annual Statement and from other sources, as part of a program to protect a company's financial integrity.