Best estimate reserves

Question 1

Best Estimate Reserves

Answer 1

o It is a point estimate, the best estimate is described as a single number, not as a range of reasonable outcomes
o It is not inherently optimistic or pessimistic, the best estimate does not include any deliberate bias in the setting of the underlying assumptions
o It is based on sound and appropriate actuarial or statistical techniques
o It is based on current and credible information

Question 2

stability of the claims development pattern may be affected by (10)

Answer 2

o Changes in terms and conditions
o Distortions in the data
o Changes in claims handling processes
o Market wide initiatives
o Claims reviews
o Seasonality
o Changes in commencement of writing policies
o Changes in average policy length
o Changes in reserving policy
o Developments in the business, economic and legal environment

Question 3

the statistical methods of estimating outstanding claims might be impaired by distortions which invalidate the underlying assumptions

Answer 3

o Errors in the data
o Large claims
o Inflation
o Latent claims
o Catastrophes
o Changes in procedures
o Changes in the mix of business
o Lack of data