CIA Annual Meeting Assemblée annuelle de l’ICA June 29 & 30, 2006 Ÿ Les 29 et 30 juin 2006 Ottawa, Ontario GRP-4 Group Disability Reserving

GRP – 4 Group Disability Reserving Gary Walters – Current state of affairs Peter Douglas – Stochastic LTD reserving Barry Senensky – Claim-by-claim terminations Please ask questions at end of any presentation

Group Disability Reserving Current State of Affairs Based on a survey done fall 2005 14 responding companies Covers $12B of LTD reserves and $1.6B Life waiver reserves No companies use stochastic methods for morbidity

Group Disability Reserving Current State of Affairs Adjudication of Life Waiver done with LTD yet reserve termination and mortality assumptions match for only 2 companies 12 Companies use CGDT/GLTD phased in after 2 to 10 years 20 year old US table! Only one company varies termination by diagnosis, only 1 by incidence rate, 1 by COLA and 3 by province

Group Disability Reserving Current State of Affairs Two companies do not allow for unknown CPP/QPP decisions, 7 of rest just reduce gross reserve by a % Termination rates based on block or industry experience usually used for refund accounted groups Morbidity PADs usually constant % of expected terminations, 5 companies do have some variation (usually by duration only)

Group Disability Reserving Current State of Affairs LTD reserving is just not Sensitive to the risks for each claim or Sensitive to changes in the mix of business Reflective of the level of fluctuation within a block

GRP – 4 Group Disability Reserving Peter Douglas Stochastic Morbidity Models for LTD

GRP – 4 Group Disability Reserving Barry Senensky An individual reserve for Dave!

GRP – 4 Group Disability Reserving Questions?