Casualty Actuarial (C) Task Force
March 31, 2008
The Task Force adopted interim conference call minutes.
Changes to the NAIC Loss Cost Memorandum – Workers’ Compensation and the NAIC Expense Constant Supplement used for the calculation of a company’s loss cost multiplier with expense constants was adopted by the Task Force and will be forwarded to the Speed to Market (C) Task Force for their consideration. Most notably, there was a correction to the formula used in the calculation of the loss cost multiplier. A change on another loss cost multiplier filing form will be reviewed by the Workers’ Compensation Large Deductible Issues Group, who is also awaiting a response from the American Academy of Actuaries (AAA) Workers’ Compensation Committee prior to continuing work on the large deductible referral.
The Catastrophe Issues Group will focus on aspects of how catastrophe models are used in pricing and how reinsurance costs and catastrophe costs are allocated. The group expects to provide some updated direction to aid the regulatory review of CAT modeling, which would likely include an update to the questions regulators can ask that are included in the Catastrophe Computer Modeling Handbook, 2001. The Task Force will coordinate this work with the Catastrophe Insurance (C) Working Group. In addition the Task Force will ask the American Academy of Actuaries (AAA) to update their Catastrophe Monograph and the Actuarial Standards Board to update their standard on catastrophe modeling. In addition, there is potential to receive an additional charge from the C Committee in their work with focus on modelers and the oversight of the development of the modeling. Interested parties expressed concern that there might be a disconnect in regulatory requirements if companies are asked to use a model to determine an RBC charge for catastrophe but are not allowed to use that same model to develop rates.
The Financial Analysis Handbook Issues Group is beginning work to propose changes to the actuarial opinion sections of the Financial Analysis Handbook. The Task Force expects to propose changes to the Financial Analysis Handbook (E) Working Group before May.
The changes to the Statement of Actuarial Opinion requirements for intercompany pools will be effective in 2008, however this was limited to cases where there is one lead company that retains 100% of the pool and one or more other companies that retain 0% of the pool. Changes for other types of intercompany pools may be addressed at a later date, but likely not this year.
The Statistical Issues Group submitted a Commercial Lines Competition Database Report to the Task Force and noted a few changes that were made to the report. Market share in risk retention groups will now be shown and the data on surplus lines was corrected. The report was adopted.
The Property and Casualty Line of Business Subgroup will begin a project to review the line of business definitions within the Annual Statement Instructions. Reporting, especially for commercial lines, is not consistent by line of business. This might be an issue with the reports that are generated, including the Profitability Report.
The Profitability (C) Working Group plans to begin discussions on the Report on Profitability by Line by State in 2007 after the Summer National Meeting.
The Accident and Health (B) Working Group has requested the Task Force participate in a project to review the process regarding how an actuary is appointed. This would harmonize the process for P&C, life, and health.
The Task Force received updates on the principles-based reserving project, the status of the reinsurance risk transfer survey, the Casualty Actuarial Society’s Report on the Credibility of the Actuary, and work of the AAA’s Committee on Property/Liability Financial Reporting.
Action Items: