The P&C Actuary's Role in Solvency Monitoring - Property and ...

PACICC – The P&C Actuary’s Role in Solvency Monitoring Page 6
These initiatives were directed at:
― Initial and continuing capital and surplus requirements
― The adequacy of security provided by reinsurance arrangements as well as incentives for
direct writing companies to write good quality business
― Quality and collectability of assets
― The adequacy of claims and other reserves 8
It was recognized that the adequacy of claims reserves was fundamental to the financial health of
P&C insurance companies. Thus, it was proposed that P&C insurers be required to provide an
annual certificate signed by an appropriately qualified actuary. At the November 1983 CAS
annual meeting, Robert Hammond (federal Superintendent of Insurance) stated that it was
anticipated that “the person signing the certificate will be required to state that in his or her
opinion, the provision for outstanding claims represents a fair and reasonable estimate of the
amounts that, together with amounts to be recovered from reinsurers, will be required to settle the
claims.” 9 Hammond noted that the objective of such a requirement was to focus greater attention
on the adequacy of claims reserves and to encourage more direct involvement in the industry of
actuaries qualified in the P&C field.
Hammond also discussed the importance of reinsurance to P&C insurers:
Reinsurance is so important to the financial soundness of most property and
casualty insurance companies that we think we must insist that the actuary
expand his certificate beyond the net reserves retained by the company. We think
that the actuary must review the adequacy and the appropriateness of the
reinsurance arrangements and be prepared to express a view on the recoverability
of amounts that will be due from reinsurers. 10
Hammond continued:
We acknowledge that these proposals regarding required reports from casualty
actuaries need to be refined. Certainly, before anything is put into legislation, we
plan to discuss our proposals in detail with the profession. I think the important
point is that we see our proposals as being a step towards requiring more
actuarial involvement in the property and casualty industry in Canada. Reliance
on the professionalism of the actuary has been one of the cornerstones in the
development of the existing supervisory system in Canada for life insurance
companies and I believe that we should be moving in the same direction for the
property and casualty industry.
One of the practical problems we must face in moving in this direction is the lack
of actuaries in Canada qualified to practice in the casualty field. For this reason,
the proposals as originally published suggested that in certain specified
circumstances, and with the approval of the Superintendent, an opinion from
8 Hammond 1983.
9 Hammond 1983.
10 Hammond 1983.