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Electing loss reserve discounts

Article Abstract:

Property and casualty insurers face an important decision in 1992: should they discount loss reserves for 1992-96 using industry loss payment patterns or company patterns. As of 1992, the 'fresh start' benefit associated with using industry data is no longer available, simplifying the choice. But there are other factors to consider. One is Section 846 of the IRS Code, which requires insurers to discount loss reserves to their present value. Another is a regulation prohibiting the use of company loss payment patterns for lines of business where an insurer does not have sufficient experience.

Taxation

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Redefining experience rating

Article Abstract:

Correctly evaluating the experience rating for workers' compensation and other casualty insurance is complicated by simple mathematical or clerical errors and by rigidly applying formulas without considering the novel elements of a situation. The mathematical and clerical errors can be minimized through a claims administration audit. Insurers need to consider the fairness of applying standard formulas to situations that may be non-standard.

Insurance industry, Accounting and auditing

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