Loss Reserve Analyses
One of management’s most critical tasks in preparing a program’s financial reports is establishing a reasonable accrual for unpaid loss and loss adjustment expense obligations. Testing and certifying the adequacy of loss reserves is a large part of what we do at Huggins Actuarial Services, Inc. In order to reflect your company’s unique program characteristics, Huggins places emphasis on utilizing the program’s actual data and development to the maximum extent possible (rather than relying on external benchmarks). Our estimates are derived using techniques and procedures that satisfy guidelines promulgated by the Casualty Actuarial Society. Throughout the accrual analysis process, we remain in constant communication with the Company’s program administrators, risk management and financial personnel. We also work hand-in-hand with the Company’s claims personnel and/or third party claims administrator, as claims adjudication philosophies drive loss development patterns.
In the determination of the program’s accrual, we work closely with the auditors while representing the interests of the program. We will work closely with the auditors in the determination of your accrual. Generally accepted actuarial procedures often lead to varying opinions on the indicated unpaid claims liabilities, and in response to this, our actuaries provide documentation in our reports supporting the analysis sufficient to show the auditors that the assumptions used and conclusions reached are reasonable and supported by the data.
When the financial condition of the program is under review, regulators will rely on the Company’s actuarial report in support of the Company’s financial statements. In addition to the actuarial report, a formal Statement of Actuarial Opinion (SAO) is also frequently requested by the regulator during such a review. Actuarial reports and SAO’s are services that Huggins routinely provides to clients, as well as interacting with regulators on our client’s behalf on an as needed basis.
Collateral negotiations are impacted by a multitude of factors. With Huggins’ expertise in a variety of industry segments, such as self-insured programs, alternative markets, and reinsurance allow us valuable perspective on these factors. Our approach in preparing loss reserve analysis is designed to maximize the usefulness of a program’s data, and the program may use our analysis as a tool in negotiating collateral associated with deductible or retentions maintained.
Other services offered include:
- Alternate risk transfer analysis, including, if appropriate, captive feasibility study;
- Provide assistance in the settlement of individual claims, including present-value calculations;
- Analysis of loss portfolio transfers and/or commutation of reinsurance;
- Provide assistance to the Company or the insurance/reinsurance broker in the placement, pricing, and/or optimization of excess insurance or reinsurance;
- Identification of developing trends in the Company’s self-insured claim liabilities;
- Provide assistance with catastrophe management information system development and exposure management;
- Review of insurance/reinsurance contracts, including analyses of loss experience under existing contracts, a review of proposed renewal contracts, and the analysis of existing contracts with regard to suitability for commutation;
- Perform risk transfer analysis on insurance and reinsurance contracts;
- Conduct financial analysis and forecasting, including dynamic financial analysis testing (DFA);
- Provide litigation support and expert witness testimony on the program’s behalf, including arbitration proceedings;
- Assistance with expense reimbursement on government contracts;
- Assistance with merger and acquisition analysis;
- Perform self-insurance feasibility studies;
- Conduct self-insurance financial performance review;
- Conduct captive insurance company feasibility studies;
- Perform insurance effectiveness reviews;
- Conduct claims administration effectiveness reviews;
- Assist with claims management information system development;
- Perform cost of risk allocation.