Our Services

We provide a variety of actuarial services to our to clients. They include:

• Estimation of unpaid claim liabilities & statutory statements of actuarial opinion
• Loss reserving process evaluation & improvement
• Financial due diligence, valuation & litigation support services
• Alternative risk financing studies
• Audit & regulatory support services

 

Estimating unpaid claim liabilities

Unpaid loss and loss adjustment expenses are a significant financial liability for property & casualty insurance companies or corporate entities that self-insurer some component of their property & casualty exposure. The accrual will impact both income and surplus (or net worth). Clearly, care must be taken to assure that the estimate of the liability is reasonable and takes into consideration all relevant factors and conditions. These include internal factors, such as changes in claim handling procedures, and external influences such as changes in economic conditions or changes in the regulatory/judicial climate. We use a wide variety of actuarial methods to develop estimates of unpaid claim liabilities that reflect these factors and influences. From the results of these different methods we determine a range of reasonable estimates of the unpaid claim liability as well as a single point-estimate of the liability. This range provides a measure of the uncertainty in estimating the expected unpaid claim liability.

Uncertainty

Understanding the uncertainty in the unpaid claim liability is critical piece of information management needs to manage risk and capital. The unpaid claim liability is the total amount of money it will eventually be paid to extinguish all of claim obligations incurred under the coverage issued. The value of the liability will not be known with certainty until all unpaid claims are finally settled and their settlement amounts known. It could be many years before this occurs.

The actual process that determines the ultimate amount of the liability is extremely complex and has an infinite number of variables, some measurable and some random, that influence the outcome. The final outcome cannot be determined with certainty at the time the liability is estimated because the ultimate cost of each unpaid claim is dependent on the inherent randomness of a multitude of factors in the claim reporting, adjudication and settlement process that have yet to occur. However, through statistical techniques, the distribution of possible outcomes can be estimated. We will use these techniques to provide you with an estimate of the distribution of potential outcomes. The distribution provides a measure of the risk that actual costs could deviate from the recorded reserve amount.

Loss reserving process evaluation & improvement

The process of setting loss reserves is a critical part of the financial close process and typically involves the coordination of several operational areas:

• The monthly booking process – the method used by finance to set actual recorded loss reserves. For example, –planned loss ratios are applied to earned premium by line of business to establish the accrual for the current accident period and a roll-forward of prior period recorded reserves adjusted for payments and management reserve actions.
• The actuarial evaluation of unpaid claim liabilities – the periodic actuarial analyses using the latest data and/or the roll-forward of prior period actuarial estimates to reflect current information.
• The management decision making – process that synthesizes all of the available information and directs adjustments to planned loss ratios and/or prior period recorded reserves.

The process requires a collaborative effort between senior management, actuarial and financial operations and the availability of timely and accurate data. We can help you evaluate the strengths and weakness of your current processes and advise on ways it could be improved and made more efficient.

Financial due diligence, valuation & litigation support services

Mergers & Acquisitions

We are available to assist you with your evaluation of potential mergers and/or acquisitions by doing financial due diligence reviews and valuations. Services include:

• Independent evaluation of unpaid claim liabilities and reinsurance recoverable on unpaid
• Fair value estimation of loss reserves and unearned premium reserves for PGAAP financial reporting purposes
• Risk assessment, quantification and mitigation strategies
• Evaluation of pro-forma financial projections

Litigation Support

We are available to provide assistance and support to you in conjunction with any litigation or arbitration proceedings you may be involved with provided we have no conflict with any of the parties involved. Services include:

• Independent opinion on actuarially based issues
• Expert testimony
• Assist and advice on actuarial issues at hearings and/or depositions

Alternative risk financing studies

Structuring an efficient and effective risk management program to handle your organizations property and casualty risks is an important management responsibility. Such a program may include a captive insurance company or some alternative mechanism for retaining a portion of your risk. We can help you in evaluating which alternative is right for you by performing a feasibility study. Such a study includes:

• Loss funding projections – actuarial estimation of the amount needed to fund the annual cost of retained loss and expenses.
• Risk evaluation – estimation of the variability of annual costs based on the risk profile of the insured business
• Pro-forma financial statements – projections of future income, assets, liabilities and cash flows of the chosen program. These pro-forma’s financial statements can be prepared under various scenarios to provide estimates of the sensitivity of future financial results to key assumptions.
• Regulatory filings – preparation of the actuarial material that is required to be included in filings submitted to regulatory authorities.

Once the alternative program is chosen and active we can assist the management by performing key services:

• Annual evaluation of unpaid claim liabilities
• Annual certification of recorded loss reserves for regulatory authorities
• Annual funding analyses

Audit and regulatory support services

Audit support

We have extensive experience providing actuarial services to auditors of insurance companies, captive insurers and self-insured entities. As a result, we are very familiar with the financial reporting requirements of GAAP, SAP IFRS and GASB as they relate to insurance entities and self-insureds. We focus on understanding the nature of the business and risks of the entity being audited so that we fully meet the needs of the auditor. Our audit support services include:

• Independent analysis of unpaid claim liabilities
• Peer review and evaluation of other actuary’s work product
• Risk transfer analyses

Regulatory consulting services

We have extensive experience providing actuarial services to state insurance regulators in support of their statutory financial examination of insurance companies. As a result we are very familiar with NAIC examination requirements and statutory accounting principles.

We focus on working closely with the examiner-in-charge to plan the scope of our involvement to meet the needs of the examination team and reflect the nature of the business and risks of the entity under examination. Our regulatory support services include:

• Independent analysis of unpaid claim liabilities
• Peer review and evaluation of other actuary’s work product
• Risk transfer analyses
• Annual Statement review
• Risk-focused assessments & evaluations