Jim Van Elsen, FSA, MAAA Principles-Based Reserving Continues to Move Forward
Unfortunately, this is a period of time when most valuation actuaries are focusing on year-end reporting. In spite of this, companies must follow these developments closely. PBR has the potential of dramatically changing the reserve development for statutory accounting.
Simone Brathwaite, FSA, FCIA Why a complex PBR, why not simply market-consistent?This is a season of “PBR mania” for US insurers. There are currently countless discussions, newsletters and presentations on the PBR proposals, its advantages and disadvantages. The most recent PBR proposal from the LHATF is very similar (if not identical) to the Canadian Asset-Liability Method (CALM) used for Canadian GAAP financial reporting. This choice is surprising for many reasons. Having worked on both market-consistent valuations in Europe and theUSas well as CALM valuations in Canada, it is clear that both approaches would be an improvement from the current USstatutory reserving methods. However, the opportunity to overhaul insurers’ current valuation systems, re-educate practitioners, and step into a different framework comes only once in a blue moon- every 10 years on average. If the change is to succeed -achieve industry buy-in and have longevity – the choices made need to have foresight. That is, the approach not only needs strong theoretical underpinnings, but it must also offer practical long-term advantages to the key stakeholders - investors, majority owners, regulators, management and practitioners. The market consistent (MC) valuation framework reigns on both these fronts. Leon R. Gottlieb, FCAS, MAAA Hospital Professional Liability Benchmarking:Joint Oliver Wyman, Marsh Effort Breaks New Ground The frequency of medical malpractice claims has been declining steadily since 2002, driven by significant drops in claims involving obstetrics and rehabilitation. Despite the decline, obstetrics claims comprise 14 percent of overall hospital malpractice claims in 2005 and accounted for 32 percent of claim costs. A new report, conducted by Oliver Wyman, Marsh, and CS STARS – all operating units of Marsh & McLennan Companies, examines trends involving more than 25,000 malpractice claims at 357 hospitals and health care facilities in 41 states throughout the US from 1991 through 2005. According to the study, malpractice claims take 33 months on average to resolve with little variance by type of procedure, service, or facility. Beth Fritchen, FSA, MAAA Oliver Wyman’s Health Insurance Carrier Trend Report AvailablePerhaps more than ever, health insurers are facing the need to balance affordability and profitability. If a health insurer goes to market with a portfolio of products that are overpriced, it will lose market share and it may see the risk profile of its block of business deteriorate. Alternatively, if the insurer goes to market with products that are under-priced, profitability will suffer. To help the industry better understanding the key role that medical trends play in developing health insurance premiums, Oliver Wyman has been publishing a semi-annual report that summarizes the self-reported pricing trends that major health insurance companies employ in pricing their health insurance products since 2001. The Carrier Trend Report provides trends for a wide range of health insurance products, from group medical insurance to individual insurance to dental and vision to the latest health insurance products – Medicare Part D and health savings accounts. Karen Bender, FCA, ASA, MAAA No Easy Answer: Is there a future for individual health insurance?"Health Coverage Continues Decline." "Employment-Based Coverage Drops." These are typical of the headlines and articles prevalent in the news today. In a "normal" market, the erosion of one source of supply would enhance the opportunities of other suppliers. So if employment-based coverage drops, this means that there will be an increased demand for individual insurance, right? As any health actuary who has been in the business for long knows, health insurance is not a “normal” market and a drop in the employment-based health insurance market may or may not bode well for individual health insurance. The real underlying problem to the health insurance "crisis" is that health care is extremely expensive. I want to say up front that I don’t have any easy answers to this. Easy answers would already have been identified and implemented. Even so, the issues facing the individual health insurance market are real and merit discussion. Jim Van Elsen, FSA, MAAA Useful Actuarial ResourcesIt’s December, and where are your valuation interest rates? What is the current “applicable federal interest rate?” Did the valuation rate for life insurance change? Didn’t the NAIC adopt a new GRET table? What are the transition rules for the 2001 CSO? When does the 2001 CSO become the “prevailing commissioners’ standard table?” What about for §7702? Follow this article for the answers to these, and many other questions. In the future, this information may be accessed by clicking this link … Copyright © 2007 Oliver Wyman |
There is much to be completed by March 2008 to implement the new Principles-Based Reserving for statutory accounting (PBR). It is likely there will be significant changes made to PBR between now and then.