At 75% level of confidence, is the RBC framework hurting the insurers?
Insurers are expected to be ready since they have had numerous years preparing themselves for this eventuality. But in reality, insurers writing substantial motor business have their CAR severely challenged. In simple terms, most insurers in the past have the habit of massaging their claims case reserves in order to prop up a show for the year-end financial reporting. At 75% confidence level and with the fast rising industry loss ratio for third party bodily injury claims, any actuary is not about to make assumptions that could compromise their professional position. Therefore if the claims practitioners do not have an inkling of how their decision on claims reserving can impact the company’s CAR, they need to be shot! They must know, time is an essence and interest works on a compounding basis over time…. The old phrase, “Let’s sleeping dogs lie” must surely goes….. The Underwriters’ Position – With reasonable understanding of how those relevant risk charges (refer to the table above)
