Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Life
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

DW Simpson
Actuarial Jobs

Visit our site for the most up to date jobs for actuaries.

Actuarial Salary Surveys
Property & Casualty, Health, Life, Pension and Non-Tradtional Jobs.

Actuarial Meeting Schedule
Browse this year's meetings and which recruiters will attend.

Contact DW Simpson
Have a question?
Let's talk.
You'll be glad you did.


Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 06-19-2017, 11:24 AM
10IsAWaste 10IsAWaste is offline
Member
 
Join Date: Jul 2008
Posts: 92
Default GAAP Reserve not a good representative of TRAD Life liability

Hi, could someone help explain why GAAP Reserve is not a good representative of TRAD Life liability, in simple terms?

Your help is greatly appreciated! I did not take the life/annuity track...
Reply With Quote
  #2  
Old 06-19-2017, 12:18 PM
CuriousGeorge CuriousGeorge is offline
Member
CAS SOA
 
Join Date: Dec 2005
Posts: 1,208
Default

Who says it isn't?
Reply With Quote
  #3  
Old 06-19-2017, 01:09 PM
10IsAWaste 10IsAWaste is offline
Member
 
Join Date: Jul 2008
Posts: 92
Default

Quote:
Originally Posted by CuriousGeorge View Post
Who says it isn't?
a more senior actuary said it. i think it has something to do with a big % of trad business being re-insured...
Reply With Quote
  #4  
Old 06-19-2017, 03:04 PM
Numbers Nerd's Avatar
Numbers Nerd Numbers Nerd is offline
Member
SOA AAA
 
Join Date: Sep 2001
Location: Midwest
College: University of Wisconsin
Favorite beer: Ale, Lager, you name it
Posts: 1,613
Default

Well, GAAP reserves rely on padded historical assumptions, which are not updated unless a gross premium valuation (aka reserve adequacy analysis) says they are insufficient. So you could have discount rates that are too high, lapse rates that are too high, mortality rates that are decades out of date, expenses that are too low, etc. Any or all of those outdated assumptions could cause your GAAP reserves for a particular product type to be unrepresentative.
Reply With Quote
  #5  
Old 06-19-2017, 03:13 PM
JMO's Avatar
JMO JMO is offline
Carol Marler
Non-Actuary
 
Join Date: Sep 2001
Location: Back home again in Indiana
Studying for Nothing actuarial.
Posts: 37,428
Default

Quote:
Originally Posted by 10IsAWaste View Post
a more senior actuary said it. i think it has something to do with a big % of trad business being re-insured...
That is unlikely to be the reason, since the GAAP reserve would normally be offset for the reinsurance.

But the real question is this - how does your company management define "Trad life liability"? And by the way, are you in the US?
__________________
Carol Marler, "Just My Opinion"

Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Apr 5, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.
Reply With Quote
  #6  
Old 06-19-2017, 05:48 PM
10IsAWaste 10IsAWaste is offline
Member
 
Join Date: Jul 2008
Posts: 92
Default

Quote:
Originally Posted by Numbers Nerd View Post
Well, GAAP reserves rely on padded historical assumptions, which are not updated unless a gross premium valuation (aka reserve adequacy analysis) says they are insufficient. So you could have discount rates that are too high, lapse rates that are too high, mortality rates that are decades out of date, expenses that are too low, etc. Any or all of those outdated assumptions could cause your GAAP reserves for a particular product type to be unrepresentative.
That's a good point. Thank you!
Reply With Quote
  #7  
Old 06-19-2017, 05:55 PM
10IsAWaste 10IsAWaste is offline
Member
 
Join Date: Jul 2008
Posts: 92
Default

Quote:
Originally Posted by JMO View Post
That is unlikely to be the reason, since the GAAP reserve would normally be offset for the reinsurance.

But the real question is this - how does your company management define "Trad life liability"? And by the way, are you in the US?
yes, i'm in the US.

Reinsurance was just my guess (perhaps a bad guess...). I was looking at some liability numbers calculated using best estimate assumptions. Then those BE liabilities were split into certain categories using Net GAAP reserves. However, Trad Life was singled out and was split using something else, because i was told Net GAAP reserve is not good for Trad in this exercise...
Reply With Quote
  #8  
Old 06-19-2017, 06:42 PM
JMO's Avatar
JMO JMO is offline
Carol Marler
Non-Actuary
 
Join Date: Sep 2001
Location: Back home again in Indiana
Studying for Nothing actuarial.
Posts: 37,428
Default

Quote:
Originally Posted by 10IsAWaste View Post
yes, i'm in the US.

Reinsurance was just my guess (perhaps a bad guess...). I was looking at some liability numbers calculated using best estimate assumptions. Then those BE liabilities were split into certain categories using Net GAAP reserves. However, Trad Life was singled out and was split using something else, because i was told Net GAAP reserve is not good for Trad in this exercise...
I guess I'm a bit surprised that Net GAAP Reserves are a good basis for any line of business. But then, I know nothing about your products.
__________________
Carol Marler, "Just My Opinion"

Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Apr 5, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.
Reply With Quote
  #9  
Old 07-31-2017, 04:24 PM
dunnigan dunnigan is offline
Member
SOA AAA
 
Join Date: Apr 2007
Posts: 133
Default

I could see a shock lapse assumption for a level term plan causing some odd reserve and DAC patterns. But I agree with a previous post, that outdated assumptions may be why.
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 09:23 AM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.36372 seconds with 9 queries