ASOP No. 20
The Actuarial Standards Board (ASB) of the American Academy of Actuaries adopted a revision of Actuarial Standard of Practice (ASOP) No. 20, now titled Discounting of Property/Casualty Claim Estimates. The standard applies to actuaries when performing actuarial services that involve the discounting of claim estimates for property/casualty coverages to a present value.
Claim estimates include unpaid claim estimates and future claim estimates and represent an estimate of the obligation for future loss and loss adjustment expense payments resulting from claims due to past events. Future claim estimates represent an estimate of loss and loss adjustment expenses associated with prospective property/casualty risk transfer or risk retention.
The exposure draft released in June 2022 received five comment letters that were considered in making changes that are reflected in the revised standard. Notable changes from the existing ASOP included expanding the scope to incorporate the discounting of future claim estimates for prospective risk transfer or risk retention, as addressed by ASOP No. 53, Estimating Future Costs for Prospective Property/Casualty Risk Transfer and Risk Retention, and modifying guidance to allow the actuary to consider the loss and loss adjustment expense elements separately in a claim estimate.
The ASOP is effective for any actuarial work product covered by the standard’s scope issued on or after December 1, 2023.
ASOP No. 36
The ASB also approved a second exposure draft of a proposed revision of ASOP No. 36, now titled Statements of Actuarial Opinion Regarding Property/Casualty Loss, Loss Adjustment Expense, or Other Reserves.
The standard applies to actuaries when performing actuarial services with respect to a written statement of actuarial opinion regarding property/casualty loss, loss adjustment expense, or other reserves of an insurance company or other property/casualty risk financing system, under one or more of the following circumstances:
The first exposure draft was released in July 2022 and received nine comment letters. Notable changes made to the exposure draft include revising guidance for actuaries reviewing a statement of actuarial opinion, requiring the actuary to determine the discount rate used when a material portion of the reserves within the scope of a statement of actuarial opinion is discounted, and applying material adverse deviation to the total reserves within the scope of the actuarial opinion.
The comment deadline is November 1, 2023. Information on how to submit comments can be found in the draft.