ASOP

ASB Approves Third Exposure of Proposed ASOP
on Estimating Future Costs

The Actuarial Standards Board (ASB) recently approved a third exposure draft of a proposed new actuarial standard of practice (ASOP) titled Estimating Future Costs for Prospective Property/Casualty Risk Transfer and Risk Funding. The proposed ASOP, formerly titled Property/Casualty Ratemaking, will apply to actuaries when performing actuarial services with respect to developing or reviewing future cost estimates for prospective property/casualty risk transfer and risk funding. This includes cost estimations for insurance, reinsurance, self-insurance, risk-funding or retention mechanisms, loss portfolio transfers, or any other risk-transfer mechanism.

Eighteen comment letters were received on the second exposure draft and considered in making changes reflected in the third exposure draft. These changes include:

  • clarifying the scope of the proposed ASOP to estimating future costs for prospective property/casualty risk transfer and risk funding, and not the preparation of rate filings or the issues related to interactions among ratemaking, pricing decisions, and rate regulation;

  • adding a section requiring the actuary to determine and disclose the intended measure for the estimation of all future costs based on the intent or purpose of the future cost estimates; and

  • adding additional disclosures in section 4 to be consistent with the guidance in section 3.

The comment deadline for the third exposure draft, which can be viewed here, is April 30, 2017. Information on how to submit comments can be found in the draft.