The Actuarial Standards Board (ASB) of the American Academy of Actuaries recently approved an exposure draft of a proposed revision of Actuarial Standard of Practice (ASOP) No. 20, now titled Analysis of Property/Casualty Cash Flows, Including Discounting. The standard applies to actuaries performing a property/casualty cash flow analysis involving underwriting cash flows, investment cash flows, and other cash flows. Examples include discounted claim estimates, determination of capital adequacy, product development or ratemaking studies, evaluations of investment strategy, financial projections or forecasts, actuarial appraisals, and testing of future charges or benefits that may vary at the discretion of the insurer (for example, policyholder dividends or policy terms for retrospective premiums).
In 2024, the ASB decided to remove property/casualty actuarial practice from the scope of ASOP No. 7, Analysis of Life, Health and Property/Casualty Insurance Cash Flows. This revision of ASOP No. 20 expands the scope beyond discounting of claim estimates (i.e., loss and loss adjustment expense reserves and prospective loss and loss adjustment expense funding) to include any property/casualty cash flow model (discounted or undiscounted). This includes non-loss cash flows such as premiums, underwriting expenses, and other non-loss items. The revision consolidates guidance for a variety of actuarial work products that use similar data, methods, models, and assumptions for cash flow analyses.
The proposed approach should eliminate any confusion practitioners currently face and present the expanded guidance in property/casualty-specific terminology. Additional notable changes include expanding the guidance on the changing conditions that might impact discount rates, and on risk margins applied to all cash flows.
The comment deadline is Aug. 1, 2025. Information on how to submit comments can be found in the exposure draft.
