1. One Regulatory Viewpoint F. Laurence Lindberg Deputy Division Director Regulatory Services Division Georgia Insurance Department

2. F. Laurence Lindberg 2 Disclaimer The opinions and comments expressed herein are my personal views only. My opinions and comments are not in any way an official position or comment by the Georgia Department of Insurance.

3. F. Laurence Lindberg 3 Perspective for Comments Actuarial Assistant, Assistant Actuary Financial officer, MBA, CPA CFO, Exec. VP Independent Consultant Insurance Department Examiner Deputy Receiver Insurance Department Regulator

4. F. Laurence Lindberg 4 Professional Credibility Consistent errors are noticed. Loss reserve development is considered in financial analysis. Overly-wide ranges of reasonable reserves raise questions. Some actuaries become known for being frequently low, seldom high. Bad reputations become a red flag for insolvency risk. The professionalism of most actuaries is known and appreciated.

5. F. Laurence Lindberg 5 Fables I Have Heard “We’ve been settling claims faster.” “Our new systems accelerated claims payments in the last half of the year; the old loss development factors had to be adjusted down for faster payments.” “Reserves didn’t go up because nothing changed this year.”

6. F. Laurence Lindberg 6 More Fables I Have Heard “Improved underwriting and/or claims practices reduced our loss ratios way below those of our peers.” “Our new marketing officer got better business at higher rates, while growing the business by 40%.” “Any losses above our reserves would get into excess reinsurance anyway.”

7. F. Laurence Lindberg 7 Effects on Actuaries Skepticism Scrutiny More questions and requests for deeper explanations Independent reviews of actuarial opinions, memoranda, complete reports and assumptions More hours and more fees? Or lower hourly rates actually realized?

8. F. Laurence Lindberg 8 Effects on Clients Deeper financial analyses intended to detect early signs of weakening financial strength Additional questions from regulators; requests for more detailed explanations Independent reviews of actuarial opinions, memoranda, complete reports and assumptions Increased costs and management time

9. F. Laurence Lindberg 9 Actuarial Opinions We obtain reviews of actuarial opinions for all our domestic insurers. Many actuarial opinions do not meet the technical requirements of the annual statement instructions. The opinion should explicitly state in which of the five categories it falls. Include a reconciliation of all data used in the analysis. Carefully set a materiality standard for each company; don’t use one value or percentage for all companies. Georgia does not yet commonly receive Actuarial Opinion Summaries; but we request entire actuarial reports as needed.

10. F. Laurence Lindberg 10 When You Get Our Attention Questions can lead to review of the full actuarial report Targeted examinations Independent actuarial opinion Book a corrected reserve amount Address the RBC effects

11. F. Laurence Lindberg 11 Goals for the Future Educate your clients Monitor the real-world effects on your clients of premium growth, loss cost growth and changes in the competitive environment Help clients work through problems, not around them Continue progress already made by the profession

12. F. Laurence Lindberg 12 F. Laurence Lindberg Deputy Division Director Regulatory Services Division Georgia Department of Insurance 604 West Tower, Floyd Building 2 Martin Luther King Jr. Drive Atlanta, Georgia 30334 Direct No: (404) 651-9690 E-mail: larry.lindberg@mail.oci.state.ga.us