Tag Archives: claims 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.

Individual claim reserving models: Adding value

Individual claim models (ICMs) is an emerging area of research and practice which uses individual claim level data to estimate loss reserves. Evolution in technology with respect to efficient data collection, storage and analysis has made ICMs more accessible. ICMs are most effective as a complement to existing models in a loss reserve analysis. Milliman consultants Alexandre Boumezoued and Jeff Courchene offer some perspective in this article.

A quantum leap in benchmarking P&C reserve ranges

Traditional development pattern benchmarks have provided some support in estimating fundamental liabilities, but even here, the process has long been a one-dimensional exercise, at least until now. A recently developed benchmarking tool, which includes percentiles at all stages of development, allows for the calibration of a benchmark that better resembles your portfolio. As such, this rigorously back-tested tool can provide actuaries an added level of confidence in the reasonableness of an entity’s reserve ranges. The next generation benchmarking tool, known as claim variability guidelines, is derived from extensive testing that involved all long-tail Schedule P lines of business and more than 30,000 data triangle sets. Milliman’s Mark Shapland provides perspective in this article.

The future of (individual) reserving

In most cases, the current reserving practice consists of using methods based on claim development triangles for point estimate projections and capital requirement calculations. Taking advantage of the information embedded in individual claims data is a promising alternative to address the need for more accurate models within the reserving practice. This white paper by Milliman’s Laurent Devineau, Fabrice Taillieu, and Alexandre Boumezoued examines the innovative opportunities offered by alternative individual reserving models and the main challenges with their implementation.

RIMS roundtable: Communicating process changes to your actuary

Note: On Monday, October 15, the Milliman Chicago casualty practice facilitated an actuarial roundtable discussion for the Chicago chapter of the Risk and Insurance Management Society (RIMS) covering four topics that have received a good bit of attention recently. Participants represented local businesses from healthcare service providers to nonprofits to international fast food corporations. Attendees were encouraged to share their experiences on each of the topics. This is the fourth, and final, article in our four-part series discussing each topic.

During our roundtable discussion we stressed how important it is to discuss changes in the program with your actuary and the impacts this would have. While discussing the various impacts that the most prominent changes can have on a program the focus inevitably widened to related topics.

Safety programs/Back to work
Some of the most prominent examples were the discussions on safety programs and the impact that they can have on an actuarial study, which in turn led to several discussions on back-to-work programs. The RIMS members had great insights to share on the structuring of a back-to-work program with their colleagues. Among them were making sure that everyone is involved and signs off on the program because sometimes it seems that you are “creating” jobs just to get people back into the workforce and also to set time limits on these “created” jobs to ensure that they do not become permanent.

Reserving philosophy
The other topic that garnered the most attention in this area was the claims reserving and philosophy. We discussed several of the impacts changing the reserving philosophy has, including the “double whammy” effect. Whereas most of the time reserving changes occur when companies change carriers or third-party administrators (TPAs), several of the clients asked us about the impact of the risk manager strengthening the reserves on individual claims and not necessarily changing the entire process of reserving. One of the participants was able to share a personal experience relating how she worked through it with her actuaries. She said that the incurred but not reported (IBNR) reserving levels did not increase, which was due to the effective communication. That is exactly what the roundtable hoped to emphasize with this topic.