Amerjit Grewal and Matthew Byrne suggest improvements to the current reporting techniques used by reserving actuaries
Last year, a roundtable involving senior reserving actuaries from the industry and regulatory backgrounds was held at the IFoA to discuss current reporting issues faced by reserving actuaries, and how the IFoA’s General Insurance Reserving Oversight Committee (GIROC) could make the process less onerous and more commercially minded.
Is reporting still working?
It was found that many reserving actuaries’ reports were set up several years ago, with little modification being made other than updating of the numbers. Although this helps to reduce the burden of effort in producing the report, reporting is not being used to the best advantage in terms of helping to drive business decisions.
In addition, there is a tendency for new items to be added into a regular report over the years, without other items being removed. Over time, reports grow longer, meaning key messages could be lost.
Do lengthy reports compromise comprehensibility?
Technical Actuarial Standard 100 states: “Communications shall be clear, comprehensive and comprehensible so that users are able to make informed decisions understanding the matters relevant to the actuarial information.” Reserving actuaries should question whether detailed reports, which often contain as much information as possible, are meeting this requirement.
What can we learn from other teams and departments?
When presenting our findings, could we take inspiration from the approach adopted by life actuaries? Typically, life actuaries report both pre-year-end and final results to the board, meaning they are able to stagger reporting of methodology, assumptions and any potential issues to then focus mainly on material movements.
A potential framework
Based on the above challenges, we suggest the following list of key points that reserving actuaries should consider when drafting reports for various stakeholders:
- Invest time in reviewing existing reports. It may be that starting afresh would be more beneficial than carrying forward old reports.
- Internal peer-review processes should focus on communications, not just calculations – meaning adequate time must be set aside to decide how to report findings.
- Take inspiration from other departments – for example, Solvency and Financial Condition Reports involve several departments writing one document. Could a similar approach be adopted to help make reserving reports more commercial?
- Stakeholders will have differing needs, and so ‘one report fits all’ may not work. Aim for a ‘Russian-doll effect’ style of reporting, where a layering of results is used when communicating information to stakeholders. For example, when presenting reserves, key findings should be used rather than the whole report, using component reports. This may reduce workload and allow different submission dates.
- Think like a board member, not like a reserving actuary. Move away from granular analysis and consider board interest and the key business decisions that depend on this information.
- When considering TAS compliance, ensure you’re meeting the ‘clear and comprehensible’ requirement, not simply the ‘comprehensive’ part.
- Consider alternative communication methods – do tighter deadlines make investment in automation of packs via software more appropriate?
- Present the executive summary of reports, allowing more time for looking at commercial impacts. Signpost the full detailed reports, working papers, deep dives etc that may be required as part of an audit trail.
- Consider the decision that is being made by reading the report. Is the reader able to find all the information needed to arrive at the decision?
- Accountability and transparency are essential – the board may be accountable in signing off strategic decisions, but as reserving actuaries we are responsible for ensuring that they have sufficient information to make informed decisions. Consider clear signposting of material assumptions and key limitations to help focus the attention of non-executive directors.
Communication of reserving results will always vary across companies and depends on the stakeholders in question. However, consider improvements to the process that can make reserving actuaries’ work more relevant. In particular, presenting conclusions first and then providing supporting details may help the audience to engage more clearly.
Amerjit Grewal is a GI actuary at AEGIS London and a member of the IFoA’s GIROC
Matthew Byrne is head of actuarial function at NFU Mutual and a member of the IFoA Good Actuarial Report Working Party