October 26, 2010 by Canadian Underwriter
Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), is requiring the actuaries of property and casualty insurance companies to account for changes in the insurers’ estimated claims liabilities.
This change will affect the standard annual filing of the Appointed Actuaries Report (AAR), which companies are required to submit to federal and provincial regulators.
“Whenever significant differences in ultimate estimates occur for any accident year, the actuary should provide commentary explaining such changes in ultimate estimates for each accident year,” OSFI says in a memorandum explaining the change, posted online on Oct. 26. “In addition, the actuary should discuss any actions taken to reduce the likelihood of similar differences in the future.”
The regulator is requiring that “a comparison of actual experience with expected experience on an undiscounted basis be provided for each actuarial line of business and for all lines combined for 10 years.”
OSFI goes on to say that if data for 10 years is not currently available, the actuary should comment on this fact but also move toward the 10-year standard.
The comparisons must be provided gross and net of reinsurance.
“Actual experience” in this instance refers to the ultimate gross and net undiscounted estimates selected for each accident year for each actuarial line of business valued as of the current year-end (Dec. 31 or Oct. 31).
“Expected experience” in previous year-end valuations refers to the ultimate undiscounted estimates selected by the actuary at each of the prior year-ends.
Detailed instructions are available on OSFI’s Web site at: