CIA.Valn

Question 1

What should the actuary do when determining loss cost inflation assumptions

Answer 1

• Discuss with experts, such as UWs, business analysts, fraud detection experts, and claim adjusters to understand whether loss cost inflation has already transpired in the recent claim payments and is accounted for in the latest case reserves
• May also consult external data sources related to inflation indices (ex: CPI, producer prices by product)

Question 2

The effect of inflation may emerge more quickly and distinctly for what type of line?

Answer 2

Short-tail lines.

For long tailed lines, the development method may not be appropriate when there are sudden changes in inflation rates

Question 3

To better grasp the impact of the variability of the underlying assumptions on claim liabilities, actuaries may consider doing what?

Answer 3

Performing sensitivity analyses using alternative sets of assumptions with regard to magnitude, path, and duration of loss cost inflation as well as payment patterns

Question 4

What are some actions actuaries must take regarding COVID-19 reporting

Answer 4

• Continue to report statistics & impacts related to COVID-19
• Continue to monitor potential COVID-19 class actions related to BI and long-term care facilities and any other legal actions that may have an impact on the valuation of contract liabilities.
• Whenever relevant, actuaries would comment in their reports on the impact that the COVID-19 pandemic has had on the insurer and the adjustments that were made in their policy liabilities valuation to take it into account.

Question 5

It is important for actuaries to be aware of current or emerging issues that could affect valuation of insurance contract liabilities. Name 4 of those considerations

Answer 5

1. Product reforms
2. Recent Judicial, Legislative, and Political Events
3. Catastrophic Events
4. Climate Change

Question 6

Briefly explain: Product Reforms

Answer 6

Actuaries should consider the potential effect that product reforms may have on the valuation of insurance contract liabilities

Question 7

Briefly explain: Recent Judicial, Legislative, and Political Events

Answer 7

Actuaries should communicate with claims professionals to see potential effect of recent court decisions, judicial events, legislative changes, and political events on valuation of insurance contract liabilities

Question 8

Briefly explain: Catastrophic Events

Answer 8

The extent to which any event is significant in the context of the valuation of insurance contract liabilities for a specific insurer depends on the nature of the insurer’s business, its exposure in the affected region, policy wordings, and the date of the event

Question 9

Actuaries would consider the effect of extreme events on the following:

Answer 9

• Additional costs on non-catastrophic other losses due to post-event inflation in the region as well as the country
• The payment pattern and any change that the event may have an impact on future claim payments
• ULAE estimates that may need to be tempered to the extent that the factor used to calculate the provision is a ratio to unpaid losses
• Margins for adverse deviations, particularly for recovery from reinsurance ceded

Question 10

Briefly explain: Climate Change

Answer 10

Weather related disasters are occurring with greater frequency and magnitude than the industry has experience in the past. In the transition period to the evolving climate reality, further estimation of the impact on claims is anticipated among new claim risks that will evolve within the actuaries’ mandate as it relates to setting claims reserves and capital requirements