The Runoff Environment--Considerations for the Reserving Actuary [Discussion]

As companies experience poor results or enter into weakened financial condition, particular lines of business or entire books of business may be cancelled or non-renewed and the loss reserves for this business placed into runoff. In such circumstances, it is possible that traditional reserving methodologies used to estimate IBNR reserves may produce distorted results, as the assumptions of a stable environment upon which most methodologies rely fail to hold. In this paper, we review some of the causes of such distortions and discuss some adjustments the reserving actuary may want to consider when evaluating a runoff book of business.