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SOLVENCY II TECHNICAL PROVISIONS FOR GENERAL INSURERS: By the Institute and Faculty of Actuaries General Insurance Reserving Oversight Committee’s working party on Solvency II technical provisions:

  • S. Dreksler, C. Allen, A. Akoh-Arrey, J. A. Courchene, B. Junaid, J. Kirk, W. Lowe, S. O’Dea, J. Piper, M. Shah, G. Shaw, D. Storman, S. Thaper, L. Thomas, M. Wheatley and M. Wilson...

Abstract

This paper brings together the work of the GI Solvency II Technical Provisions working party. The working party was formed in 2009 for the primary purpose of raising awareness of Solvency II and the impact it would have on the work that reserving actuaries do. Over the years, the working party’s focus has shifted to exploring and promoting discussion of the many practical issues raised by the requirements and to promoting best practice. To this end, we have developed, presented and discussed many of the ideas contained in this paper at events and forums. However, the size of the subject means that at no one event have we managed to cover all of the areas that the reserving actuary needs to be aware of. This paper brings together our thinking in one place for the first time. We hope experienced practitioners will find it thought provoking, and a useful reference tool. For new practitioners, we hope it helps to get you up-to-speed quickly. Good luck!

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Copyright

Corresponding author

*Correspondence to: Susan Dreksler, PricewaterhouseCoopers LLP, 7 More London Riverside, London, SE1 2RT. E-mail: susan.dreksler@uk.pwc.com

References

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1 See article 77 (5) of the Solvency II directive (November 2009 version).

2 Section C.4. of the Technical Actuarial Standard on Reporting (TAS R) as developed and published by the Board for Actuarial Standards, an operating body created by the United Kingdom Financial Reporting Council (FRC), discusses the transparency of data used, assumptions and rationales in the context of reporting actuarial information.

3 The Actuarial Standard of Practice number 41 “Actuarial Communications”, developed and published by the United States Actuarial Standards Board states in section 3.2 (ASOP 41, 3.2), “In the actuarial report, the actuary should state the actuarial findings, and identify the methods, procedures, assumptions, and data used by the actuary with sufficient clarity that another actuary qualified in the same practice area could make an objective appraisal of the reasonableness of the actuary’s work as presented in the actuarial report”.

4 Guideline 59 (Article 48 of the Directive).

6 In this context, one could substitute UY for AY without losing the intended meaning of the text.

7 CY refers to movement on all claims, which generally is equal to the sum of the movement for each AY or UY.

8 The triangular history used in the example is identical to the sum of the #3 and #4 writers Commercial Auto in the United States as of 31 December 2007 and 2008 (source: Highline).

9 “Bootstrap modeling: beyond the basics”, CAS Forum, Summer 2010.

10 CAS working party on quantifying variability in reserve estimates. 2005. “The analysis and estimation of loss & ALAE variability: a summary report”, CAS Forum (Fall), 29–146.

11 “Bootstrap modeling: beyond the basics”, CAS Forum, Summer 2010.

12 Excerpt from Kevin Madigan’s “A healthy skepticism toward models”.

13 The 80 observations is the result of three LoBs plus the aggregate of all LoBs (4), times nine AYs and the sum of all AYs (10), for paid losses and incurred losses (2). 80=(4)×(10)×(2).

Keywords

SOLVENCY II TECHNICAL PROVISIONS FOR GENERAL INSURERS: By the Institute and Faculty of Actuaries General Insurance Reserving Oversight Committee’s working party on Solvency II technical provisions:

  • S. Dreksler, C. Allen, A. Akoh-Arrey, J. A. Courchene, B. Junaid, J. Kirk, W. Lowe, S. O’Dea, J. Piper, M. Shah, G. Shaw, D. Storman, S. Thaper, L. Thomas, M. Wheatley and M. Wilson...

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