# Insurance and Actuarial Advisory Services Statements of Actuarial Opinion Midwest Actuarial Forum March 23, 2004 Robert H. Wainscott, FCAS, MAAA,

Slides:



Advertisements
Similar presentations
1 CHANGES TO SSAP #62 PROPERTY & CASULTY REINSURANCE NAIC Property and Casualty Reinsurance Study Group Chicago, IL May 10, 2005 Michael Moriarty Director,
Advertisements

Course on Professionalism ASOP 43 – Property / Casualty Unpaid Claim Estimates.
Assignment Nine Actuarial Operations.
W Loss Rating Models: Challenges and Opportunities Brian Ingle, FCAS, MAAA WC-3 Perspectives on Pricing Large Accounts 2007 CAS Ratemaking Seminar.
Casualty Actuaries Society Tax Issues Associated with Unpaid Losses September 12, 2006.
Statement of Actuarial Opinion and the Annual Statement Changes and Statistics Casualty Loss Reserve Seminar September 18-19, 2008 Moderator: Mary D. Miller,
1 How Well Do You Know ASOP 43? Presented by Tom Ryan, Milliman, Inc. Jason Russ, Milliman, Inc. Tim Muth, Reinhart Boerner Van Deuren September 19, 2008.
ACTUARIAL SERVICES ADVISORY Other Balance Sheet Reserves: SAO & Reinsurer Concerns Las Vegas September 2004.
Casualty Loss Reserve Seminar Risk Transfer Accounting.
Materiality and Statements of Actuarial Opinion Presentation to Appointed Actuary Seminar September 20-21, 2004 PD-11 Materiality Joseph A. Herbers, ACAS,
P & C Actuarial Issues Associated With Implementation of NAIC Accounting Practices and Procedures Developed by the Committee on Property and Liability.
Mª ANGELA JIMENEZ 1 UNIT 4. EXTERNAL AUDIT BASIS CONCEPTS.
SUNY Board of Trustees Audit Committee Presentation October 28, 2011 Stony Brook University Hospital, Stony Brook University REPORT ON RESULTS OF 2010.
Casualty Loss Reserve Seminar Minneapolis, Minnesota September 18 – 19, 2000 NAIC Codification of Statutory Accounting Actuarial Considerations Pat Teufel,
Internal Auditing and Outsourcing
Loss Reserving in Argentina, Brazil and Mexico Eduardo Esteva New Orleans, Louisiana September 11, 2001.
54 th Annual June Conference Reporting entities are required to file a supplement to the annual statement titled “Management’s Discussion and Analysis”
STATUTORY STATEMENTS OF ACTUARIAL OPINION – Changes for Today and Tomorrow Tomorrow’s Model Law 2003 CLRS Chicago, IL.
CASUALTY LOSS RESERVE SEMINAR September 10-11, 2007 Chap Cook, FCAS FCA, MAAA, CPCU Chap Cook, FCAS FCA, MAAA, CPCU Consulting Actuary, MBA Actuaries,
Skit on Reserving Committee on Professionalism Education.
Introduction to Experience Rating Kyle Vrieze, FCAS Senior Vice President, Willis Re CAS Ratemaking Seminar Cambridge, Massachusetts March 17, 2008.
PwC CAS Fair Value Project Casualty Actuaries in Europe Spring Meeting 23 April 2004 E. Daniel Thomas (1)
Non-Life Loss Reserving Practices and Documentation IAIS – ASSAL Training Seminar April 29, 2009 David Oakden.
MROC Munich Re Group P&C Loss Reserve Discounting Canadian Perspective Spring Meeting Quebec City June 18, 2008 Claudette Cantin.
1 Actuarial Evaluation of Premium Liabilities By:Claudette Cantin, FCIA, FCAS, MAAA Partner – KPMG LLP CLRS - Minneapolis September 19th, 2000.
Casualty Loss Reserve Seminar Minneapolis, Minnesota September 18 – 19, 2000 Actuarial Standard of Practice No. 36 Discussion of Implementation Considerations.
Ratemaking ASOPS By the CAS Committee on Professionalism Education.
Course on Professionalism Statement of Principles.
The Actuary’s Role in the Audit Process The Actuary’s Responsibility to Auditors and Examiners CLRS – September 9 th, 2003 Matt Carrier, ACAS, MAAA Senior.
Discussion of Unpaid Claim Estimate Standard  Raji Bhagavatula  Mary Frances Miller  Jason Russ November 13, 2006 CAS Annual Meeting San Francisco,
2003 Casualty Loss Reserve Seminar NAIC/AAA Loss Reserve Symposium for Readers and Writers of Loss Reserve Opinions.
Loss Reserves from the Actuarial, Accounting and IRS Perspectives Actuary’s Perspective by Alan E. Kaliski, FCAS, MAAA.
US Standard of Practice #43 Unpaid Claim and Claim Adjustment Expense Estimates Mary Frances Miller Christopher Carlson Casualty Actuarial Society Quebec,
Casualty Loss Reserve Seminar Claudette Cantin 2003 CLRS – September 9, 2003, Chicago, IL Premium Liabilities – U.S. and Canadian Perspectives Canadian.
1 METODOLOGÍAS Y PRÁCTICAS EN RESERVAS TÉCNICAS PARA SEGUROS DE SALUD Y SEGUROS GENERALES LIMA - 31 DE MAYO, 2007 APESEG Presentado por: APESEG & Milliman,
Regulatory Guidance to the 2004 Changes to the Actuarial Opinion SWAF Fall 2004 Wendy Germani, FCAS, MAAA Nicole Elliott, Aspiring Actuary.
Opinion Writers Symposium Casualty Loss Reserve Seminar September 10-11, 2007 Moderator: Mary D Miller, Ohio Dept of Insurance Panelists: Nicole Elliott,
Ranges of Reasonable Estimates Charles L. McClenahan, FCAS, MAAA Iowa Actuaries Club, February 9, 2004.
MATERIALITY AND THE RISK OF MATERIAL ADVERSE DEVIATION: A REGULATORY PERSPECTIVE CASUALTY LOSS RESERVE SEMINAR September 11-12, 2006 Moderator:Kris DeFrain,
Premium Deficiency Reserves - GAAP CLRS - September 24th Premium Deficiency Reserves under U.S. GAAP John G. Aquino FCAS MAAA Executive Vice President.
Estimation and Application of Ranges of Reasonable Estimates Charles L. McClenahan, FCAS, MAAA 2003 Casualty Loss Reserve Seminar.
Ranges & Actuarial Opinions: A Regulatory Perspective Nicole Elliott, ACAS, MAAA Texas Dept of Insurance.
Chapter 7 Financial Operations of Insurers. Copyright ©2014 Pearson Education, Inc. All rights reserved.7-2 Agenda Property and Casualty Insurers Life.
Proposed ASB Actuarial Standard of Practice on Statements of Actuarial Opinion Regarding Property/Casualty Loss and Loss Adjustment Expense Reserves Status.
2002 CLRS - Arlington, VA Reserve/Opinion Issues from a Regulatory Perspective Proposed Revision to the NAIC Annual Statement Instructions Richard Marcks,
Loss Reserve Opinions Mary D. Miller FCAS, MAAA Ohio Department of Insurance CASE 2006 Fall Meeting September 13, 2006.
Kpmg 2002 Casualty Loss Reserve Seminar Surety Reserving Mike Rozema, ACAS, MAAA KPMG LLP.
Accounting Implications of Finite Reinsurance Contracts 2003 Casualty Loss Reserve Seminar Chicago, IL Session 4 – Recent Developments in Finite Reinsurance.
IRS/Actuary Actuary’s Perspective by Alan E. Kaliski, FCAS, MAAA.
STATUTORY STATEMENTS OF ACTUARIAL OPINION – Changes for Today and Tomorrow Changes for CLRS Chicago, IL.
Reserve/Opinion Issues from a Regulatory Perspective Items not in the recent actuarial opinion proposal Ralph Blanchard September 24, 2002.
Risk Transfer In The Real World Presentedby Jane C. Taylor, FCAS, MAAA Junction Consulting, Inc. Casualty Loss Reserve Seminar Boston, MA September 12,
1 Casualty Loss Reserve Seminar Claudette Cantin, FCIA, FCAS, MAAA Munich Reinsurance Company of Canada September 14, 2004 Las Vegas Session 7 Loss Reserve.
© 2004 Towers Perrin September 22, 2004 Thomas L. Ghezzi, FCAS, MAAA CANE Fall 2004 Meeting Statements of Actuarial Opinion – Changes for 2004 and 2005.
Copyright © 2011 by the American Academy of Actuaries Southwest Actuarial Forum June Lisa Slotznick, FCAS, MAAA Member, COPLFR Revised ASOP No.
Charles L. McClenahan 10 South Wacker Drive, Chicago, IL Dancin’ With the Devil Ranges and Adverse Deviation Casualty Loss Reserve Seminar, September.
Casualty Actuarial Society Insurance Accounting for Actuaries May 17, 2005  Presented by: Kevin Wick, FCAS, MAAA.
Revising ASOP No. 21 Michael G. McCarter, FCAS, MAAA American International Group, Inc. Casualty Loss Reserve Seminar Chicago, September 9, 2003.
Materiality And Audit Reporting Audit Report Audit Opinion
Actuarial Credibility Task Force Report & The Potential Impact to ASOP 36 Chris Carlson, FCAS, MAAA Pinnacle Actuarial Resources, Chair Casualty Committee.
September 24, 2002 Arlington, Virginia Casualty Loss Reserve Seminar Considerations of ASOP #36 and NAIC Codification in Issuing Actuarial Opinions.
Loss Reserving in Mexico
2005 Opinions & 2006 Regulatory Guidance
Reserve/Opinion Issues from a Regulatory Perspective
Casualty Loss Reserve Seminar September 2007
RMAD _ RISK OF MATERIAL ADVERSE DEVIATION A Regulator’s Viewpoint
Mary D. Miller FCAS, MAAA Ohio Department of Insurance March 23, 2004
Bermuda Economic Balance Sheet (EBS) Technical Provisions
ASU Short Duration Contracts – New GAAP Disclosures
Non-Life Loss Reserving Practices and Documentation
Presentation transcript:

# Insurance and Actuarial Advisory Services Statements of Actuarial Opinion Midwest Actuarial Forum March 23, 2004 Robert H. Wainscott, FCAS, MAAA, FCIA Principal, Ernst & Young Robert H. Wainscott, FCAS, MAAA, FCIA Principal, Ernst & Young

2 Topics for Discussion Historical Perspective Reference Documents Codification of Statutory Accounting Classes of Opinion Opinion Requirement Changes: 2004 and 2005 Historical Perspective Reference Documents Codification of Statutory Accounting Classes of Opinion Opinion Requirement Changes: 2004 and 2005

3 Statement of Actuarial Opinion Historical Perspective Statement of Actuarial Opinion arose from insolvencies of the 1970’s Primary statutory concern is solvency “Good and Sufficient Provision” By 1990 the SAO was required in every state Statement of Actuarial Opinion arose from insolvencies of the 1970’s Primary statutory concern is solvency “Good and Sufficient Provision” By 1990 the SAO was required in every state

4 Today’s Statement of Actuarial Opinion “Good and Sufficient” has become “Reasonable” The actuary is appointed by the Board Commentary is required on such items as: – Anticipated salvage & subrogation – Discount for time value of money – Reinsurance collectibility – Retroactive reinsurance – … and more Long-duration unearned premiums are included Documentation report is required “Good and Sufficient” has become “Reasonable” The actuary is appointed by the Board Commentary is required on such items as: – Anticipated salvage & subrogation – Discount for time value of money – Reinsurance collectibility – Retroactive reinsurance – … and more Long-duration unearned premiums are included Documentation report is required

5 Statements of Actuarial Opinion Reference Documents – ASB #36 – SSAP #55; SSAP #65; SSAP #62; others – AAA Practice Note on SAO – AAA Loss Reserve Law Manual Reference Documents – ASB #36 – SSAP #55; SSAP #65; SSAP #62; others – AAA Practice Note on SAO – AAA Loss Reserve Law Manual

6 Actuarial Standard of Practice #36 Six-year effort Three exposure drafts, with many comments Public Hearing Effective: For all Statements of Actuarial Opinion provided for reserves with a valuation date on or after October 15, 2000 Six-year effort Three exposure drafts, with many comments Public Hearing Effective: For all Statements of Actuarial Opinion provided for reserves with a valuation date on or after October 15, 2000

7 Scope Written statements of actuarial opinion for which: –Opinion is provided to comply with requirements of law or regulation –Opinion is represented by the actuary as a statement of actuarial opinion Applies to loss and loss adjustment expense reserves of insurance companies, reinsurance companies and of other property/casualty risk financing systems, such as self-insurance Written statements of actuarial opinion for which: –Opinion is provided to comply with requirements of law or regulation –Opinion is represented by the actuary as a statement of actuarial opinion Applies to loss and loss adjustment expense reserves of insurance companies, reinsurance companies and of other property/casualty risk financing systems, such as self-insurance

8 Codification and The Actuary Management Records (and Supports) Best Estimate of Reserves Actuary Continues to Opine Upon Reasonableness of Reserves Management Records (and Supports) Best Estimate of Reserves Actuary Continues to Opine Upon Reasonableness of Reserves

9 SSAP #55 Unpaid Claims, Losses, and Loss Adjustment Expenses For each line of business and for all lines of business in the aggregate, management shall record its best estimate of its liabilities for unpaid claims, unpaid losses, and loss/claim adjustment expenses. If, for a particular line of business, management develops its estimate considering a range … management’s best estimate of the liability within that range shall be recorded. Management’s range shall be realistic and, therefore, shall not include the set of all possible outcomes but only those that are considered reasonable. Unpaid Claims, Losses, and Loss Adjustment Expenses For each line of business and for all lines of business in the aggregate, management shall record its best estimate of its liabilities for unpaid claims, unpaid losses, and loss/claim adjustment expenses. If, for a particular line of business, management develops its estimate considering a range … management’s best estimate of the liability within that range shall be recorded. Management’s range shall be realistic and, therefore, shall not include the set of all possible outcomes but only those that are considered reasonable.

10 SSAP #55 - Continued Unpaid Claims, Losses, and Loss Adjustment Expenses In the rare instances when … it is determined that no point within management’s estimate of the range is a better estimate than any other point, the midpoint … shall be accrued. If management determines that the high end of the range cannot be quantified, then a range does not exist, and management’s best estimate shall be accrued. If a reporting entity chooses to anticipate salvage and subrogation recoverables, the recoverables shall be estimated and shall be deducted from the liability for unpaid claims or losses. Unpaid Claims, Losses, and Loss Adjustment Expenses In the rare instances when … it is determined that no point within management’s estimate of the range is a better estimate than any other point, the midpoint … shall be accrued. If management determines that the high end of the range cannot be quantified, then a range does not exist, and management’s best estimate shall be accrued. If a reporting entity chooses to anticipate salvage and subrogation recoverables, the recoverables shall be estimated and shall be deducted from the liability for unpaid claims or losses.

11 SSAP #65 – Property and Casualty Contracts P/C contracts can be written on the following bases:  Occurrence  Cover insured events that occur within the effective dates of the policy regardless of when they are reported. Liabilities for losses shall be recorded when the insured event occurs.  Claims made  Cover insured events that are reported within the effective dates of the policy, subject to retroactive dates when applicable. Liabilities for losses shall be recorded when the event is reported to the reporting entity.  Extended reporting  Endorsements to claims made policies covering insured events reported after the termination of a claims made contract but subject to the same retroactive dates where applicable. P/C contracts can be written on the following bases:  Occurrence  Cover insured events that occur within the effective dates of the policy regardless of when they are reported. Liabilities for losses shall be recorded when the insured event occurs.  Claims made  Cover insured events that are reported within the effective dates of the policy, subject to retroactive dates when applicable. Liabilities for losses shall be recorded when the event is reported to the reporting entity.  Extended reporting  Endorsements to claims made policies covering insured events reported after the termination of a claims made contract but subject to the same retroactive dates where applicable.

12 SSAP #65 - Continued Defines the accounting practices to follow for reporting the following items: –Extending reporting guidelines –Discounting –Structured settlements –Policies with coverage periods >= to 13 months –High deductible policies –Asbestos and environmental exposures –Excess statutory reserve –Policyholder dividends Defines the accounting practices to follow for reporting the following items: –Extending reporting guidelines –Discounting –Structured settlements –Policies with coverage periods >= to 13 months –High deductible policies –Asbestos and environmental exposures –Excess statutory reserve –Policyholder dividends

13 Unresolved Issues and Interpretations What constitutes management’s “Best Estimate”? Who is “management”? Who owns the estimate? Role of the Actuary –Set reserves or review management’s reserves? What constitutes management’s “Best Estimate”? Who is “management”? Who owns the estimate? Role of the Actuary –Set reserves or review management’s reserves?

14 Whose Best Estimate? Management’s vs. the Actuary’s Why is there a difference? What is a reasonable tolerance? What’s a material difference between management’s and the actuary’s evaluation? What kind of documentation does management have for their estimate? Management’s vs. the Actuary’s Why is there a difference? What is a reasonable tolerance? What’s a material difference between management’s and the actuary’s evaluation? What kind of documentation does management have for their estimate?

15 What Kind of Opinion? Differences in Language ASOP 36 Classes –Reasonable –Excessive –Inadequate –Qualified –No Opinion Reserve Certifications? “Clean” Opinions? ASOP 36 Classes –Reasonable –Excessive –Inadequate –Qualified –No Opinion Reserve Certifications? “Clean” Opinions?

16 What is a Reasonable Opinion? Reasonable in the context of what is known/available to the actuary today? Can/Should it include the “there’s an outside shot if everything goes right” scenario? Reasonable in the context of what is known/available to the actuary today? Can/Should it include the “there’s an outside shot if everything goes right” scenario?

17 What is a Reasonable Range? Ranges often picked judgmentally. May be based on rules of thumb or actuary uses several estimation techniques and uses highest and lowest result as range. Should ranges rely more on stochastic analysis? Should ranges explicitly consider both process and parameter risk? What sort of ranges would such analysis yield? Ranges often picked judgmentally. May be based on rules of thumb or actuary uses several estimation techniques and uses highest and lowest result as range. Should ranges rely more on stochastic analysis? Should ranges explicitly consider both process and parameter risk? What sort of ranges would such analysis yield?

18 Qualified Opinions ASOP 36 definition: “the reserves for certain items are in question because they can not be reasonably estimated” When does risk of material adverse deviation produce a qualified opinion? If the difference between the high end of a reasonable range and carried reserves is more than surplus, are those reserves reasonably estimable? Is a qualified opinion necessarily bad? ASOP 36 definition: “the reserves for certain items are in question because they can not be reasonably estimated” When does risk of material adverse deviation produce a qualified opinion? If the difference between the high end of a reasonable range and carried reserves is more than surplus, are those reserves reasonably estimable? Is a qualified opinion necessarily bad?

Changes Requires identification of person responsible for providing data used in actuarial analysis Moves numbers to Exhibit A – Scope and Exhibit B – Disclosures Whether or not there is significant risk of material adverse duration Greater definition of Actuarial Report Requires auditor to test key data for opinion Requires identification of person responsible for providing data used in actuarial analysis Moves numbers to Exhibit A – Scope and Exhibit B – Disclosures Whether or not there is significant risk of material adverse duration Greater definition of Actuarial Report Requires auditor to test key data for opinion

Changes Exhibit A: SCOPE Loss Reserves A. – D. Same as current Scope E. “Retroactive Reinsurance Reserve Assumed” moves to E from F as “claims made extended loss and LAE reserve is removed from Scope section. F. Other Loss Reserve items on which the Appointed Actuary is expressing an Opinion (list separately) Premium Reserves G. Reserve for Direct and Assumed Unearned Premiums for Long Duration Contracts H. Reserve for Net Unearned Premiums for Long Duration Contracts (Ceded no longer listed separately) I. Other Premium Reserve items on which the Appointed Actuary is expressing an Opinion (list separately) Exhibit A: SCOPE Loss Reserves A. – D. Same as current Scope E. “Retroactive Reinsurance Reserve Assumed” moves to E from F as “claims made extended loss and LAE reserve is removed from Scope section. F. Other Loss Reserve items on which the Appointed Actuary is expressing an Opinion (list separately) Premium Reserves G. Reserve for Direct and Assumed Unearned Premiums for Long Duration Contracts H. Reserve for Net Unearned Premiums for Long Duration Contracts (Ceded no longer listed separately) I. Other Premium Reserve items on which the Appointed Actuary is expressing an Opinion (list separately)

Changes Exhibit B – Disclosures New items 1 & 2 – –1. Materiality Standard expressed in $US –2. Statutory Surplus $ Items 3-7 are the same as current A-E Disclosures except claims made extended loss and loss expense reserve is separately broken out by amounts reported as loss reserves and as unearned premium reserves Item 8 - Other items on which the Appointed Actuary is providing Relevant Comment (list separately) Exhibit B – Disclosures New items 1 & 2 – –1. Materiality Standard expressed in $US –2. Statutory Surplus $ Items 3-7 are the same as current A-E Disclosures except claims made extended loss and loss expense reserve is separately broken out by amounts reported as loss reserves and as unearned premium reserves Item 8 - Other items on which the Appointed Actuary is providing Relevant Comment (list separately)

Changes – Risk of MAD Requires explicit statement of whether or not actuary reasonably believes there are significant risks and uncertainties that could result in material adverse deviation and why. The explanatory paragraph should not include general, broad statements about risks and uncertainties… nor is the actuary required to include an exhaustive list of all potential sources of risks and uncertainties. Materiality standard disclosed in $US. Requires explicit statement of whether or not actuary reasonably believes there are significant risks and uncertainties that could result in material adverse deviation and why. The explanatory paragraph should not include general, broad statements about risks and uncertainties… nor is the actuary required to include an exhaustive list of all potential sources of risks and uncertainties. Materiality standard disclosed in $US.

23 What’s Material? SEC NAIC Threshold Common Sense SEC NAIC Threshold Common Sense

24 Materiality Consider the purposes and intended uses for which the actuary prepared the statement of actuarial opinion Use professional judgment as well as guidelines or standards For NAIC Opinions, the actuary may wish to consider: Quantitative “rule of thumb” measures, (I.e., % of statutory surplus) Risk Based Capital implications Minimum capital and surplus requirements IRIS ratio exceptional value triggers Accounting Guidance – Staff Accounting Bulletin 99 Discussion with regulators/auditors may be useful Consider the purposes and intended uses for which the actuary prepared the statement of actuarial opinion Use professional judgment as well as guidelines or standards For NAIC Opinions, the actuary may wish to consider: Quantitative “rule of thumb” measures, (I.e., % of statutory surplus) Risk Based Capital implications Minimum capital and surplus requirements IRIS ratio exceptional value triggers Accounting Guidance – Staff Accounting Bulletin 99 Discussion with regulators/auditors may be useful

25 Actuarial Report Defined Narrative and technical components. Requires exhibit which ties to AS and compares Actuary’s conclusions to carried amounts. Summary exhibit(s) of either the actuary’s best estimate, range of reasonable estimates, or both, that led to the conclusion in the OPINION paragraph regarding the reasonableness of the reserves. Narrative and technical components. Requires exhibit which ties to AS and compares Actuary’s conclusions to carried amounts. Summary exhibit(s) of either the actuary’s best estimate, range of reasonable estimates, or both, that led to the conclusion in the OPINION paragraph regarding the reasonableness of the reserves.

26 Actuarial Report: New names, same intent Narrative and technical components. –The narrative component - sufficient detail to clearly explain to company management, the regulator, or other authority the findings, recommendations and conclusions, as well as their significance. –The technical component - sufficient documentation and disclosure for another actuary practicing in the same field to evaluate the work. This technical component must show the analysis from the basic data, e.g., loss triangles, to the conclusions. Narrative and technical components. –The narrative component - sufficient detail to clearly explain to company management, the regulator, or other authority the findings, recommendations and conclusions, as well as their significance. –The technical component - sufficient documentation and disclosure for another actuary practicing in the same field to evaluate the work. This technical component must show the analysis from the basic data, e.g., loss triangles, to the conclusions.

27 Actuarial Report: New Specifications Requires Extended Comments on: Trends that indicate the presence or absence of risks and uncertainties that could result in material adverse deviation Factors that led to unusual IRIS ratios for Reserve tests (10,11,12), and how these factors were addressed in prior and current analyses. Requires Extended Comments on: Trends that indicate the presence or absence of risks and uncertainties that could result in material adverse deviation Factors that led to unusual IRIS ratios for Reserve tests (10,11,12), and how these factors were addressed in prior and current analyses.

28 Data Testing: Auditor/Actuary Consultation The independent auditor consults with the actuary to “…obtain an understanding of the data identified by the appointed actuary as significant …” to the decision regarding the reasonableness of the reserves so that the data may be tested by the auditor.

Changes Notification of change in Actuary procedure will be similar to that required when Auditor is changed including letters stating there were no material disagreements on items within the Scope of the Opinion. Actuarial Opinion Summary(AOS) to be due March 15 Explicit discussion regarding continued pattern of adverse development (if 3 of last 5 years) Model Law to protect confidentiality of AOS Notification of change in Actuary procedure will be similar to that required when Auditor is changed including letters stating there were no material disagreements on items within the Scope of the Opinion. Actuarial Opinion Summary(AOS) to be due March 15 Explicit discussion regarding continued pattern of adverse development (if 3 of last 5 years) Model Law to protect confidentiality of AOS

30 Model Law: What it Does Creates an Actuarial Opinion Summary document submitted March 15. Summary contains very basic data on the appointed actuary’s range or point estimate Protects the confidentiality of material in both the Report and the Summary Provides legal protection to the appointed actuary except in cases of fraud or willful misconduct by the actuary Creates an Actuarial Opinion Summary document submitted March 15. Summary contains very basic data on the appointed actuary’s range or point estimate Protects the confidentiality of material in both the Report and the Summary Provides legal protection to the appointed actuary except in cases of fraud or willful misconduct by the actuary

31 Model Law: The Enactment Process Passed Casualty Actuarial Task Force at the NAIC in June 2003 Ratified by parent committee at the NAIC in September, then Executive Committee and Plenary in December. Referred to states for legislative or regulatory action Expected to be requirement for accreditation Passed Casualty Actuarial Task Force at the NAIC in June 2003 Ratified by parent committee at the NAIC in September, then Executive Committee and Plenary in December. Referred to states for legislative or regulatory action Expected to be requirement for accreditation

32 Model Law: Actuarial Opinion Summary Required to be sent only to domiciliary state –Other states may request if they can demonstrate they can protect confidentiality Contains –Net and Gross point estimate and/or range –Company’s Net and Gross Carried Reserve –Difference between the Company’s Net and Gross Carried reserves and the Appointed Actuary’s point estimate and/or range –Discussion of any persistent adverse development (Schedule P 1 year test adverse by 5% of surplus or more in 3 of the last 5 years) Required to be sent only to domiciliary state –Other states may request if they can demonstrate they can protect confidentiality Contains –Net and Gross point estimate and/or range –Company’s Net and Gross Carried Reserve –Difference between the Company’s Net and Gross Carried reserves and the Appointed Actuary’s point estimate and/or range –Discussion of any persistent adverse development (Schedule P 1 year test adverse by 5% of surplus or more in 3 of the last 5 years)