Tag Archives: actuarial reserving

New modeling and allocation capabilities in Milliman’s Arius solutions provide richer analysis and reporting

Milliman announced today that it has released version 2020b of its Arius® solutions, a family of state-of-the-art reserve analysis systems for property and casualty insurers. This update provides significant enhancements to the systems’ analytical capabilities, together with key additions to the reporting and data management tools.

This release adds new generalized linear modeling (GLM) capabilities to help actuaries better model and understand their claim costs. GLM tools can be especially valuable when analyzing periods of inflationary pressure on the claim process or significant changes in claim handling within a company or throughout the industry.

In addition, the new release of Arius Enterprise®—Milliman’s reserving solution designed specifically for larger insurers and self-insureds—helps actuaries analyze results at one level of detail and then report on them at different levels. The system’s new allocation tools more reliably and efficiently perform the summary and reporting work that is typically accomplished using riskier spreadsheets.

Our Arius solutions are specifically designed to help our clients better understand and account for the complexities in their business. This release provides a number of new tools to help actuaries with sophisticated calculations, as well as data and report management, so they can focus on the areas where their substantial expertise can provide the most value to their organizations.

Sharing economy presents risks and opportunities for P&C insurers

The on-demand sharing economy is providing insurance companies an opportunity to develop products for new lines of business. Home sharing, ride sharing, and fashion rentals are three new insurance exposures resulting from the economy. These new exposures present actuaries with several challenges when trying to reserve for their associated risks. In this article, Milliman consultant Dana Ryan discusses the property and casualty (P&C) insurance opportunities and risks of the sharing economy.

Central Bank of Ireland review of Solvency II life insurance pricing and reserving assumptions

In February 2017, the Central Bank of Ireland published letters on its website relating to its review of the consistency of Solvency II life insurance pricing and reserving assumptions. This briefing note by Milliman’s Aisling Barrett and Sinéad Clarke summarises the contents of these letters. The authors also reference the contents of the December 2016 industry letter on the standard formula Solvency Capital Requirement.

Actuaries and reserve adequacy: Are P&C actuaries impacting the reserving cycle?

For more than 30 years, reserve adequacy for the property and casualty (P&C) insurance industry has been highly cyclical, alternating between periods of adverse and favorable reserve development. No one knows for certain what factor or factors cause these swings. It’s commonly thought that internal industry influences—such as claims department practices, changes in pricing, or management decisions—are potential sources. Although we expect these elements do play a role, there’s no evidence to suggest they are the primary reason for the reserving cycle.

What few have considered, on the other hand, is the possibility that common methods used by actuaries to determine appropriate reserves may themselves be an important contributing factor to movements in the reserving cycle. In their article “Actuaries and reserve adequacy,” Milliman’s Susan Forray and Zachary Ballweg assess the potentially cyclical behavior of various actuarial reserving methods.

This article originally appeared in the March/April 2014 issue of Contingencies.

Peaks and troughs: Reserving through the market cycle

It is well-known that the carried reserve adequacy of the property and casualty industry, as a whole, varies significantly across the market cycle. Much less understood is the extent to which this may stem, in part, from actuarial reserving methods. If a material relation exists, any cyclicality in actuarial reserving methods could lead to overestimated or underestimated reserves, thus exacerbating the market cycle.

This paper authored by Susan Forray and Zachary Ballweg assesses the potentially cyclical behavior of various actuarial reserving methods. These include the paid and incurred (i.e., paid plus case) chain ladder, Berquist-Sherman, and Munich Chain Ladder methods.

Originally published in the Casualty Actuarial Society E-Forum, Fall 2013.