2014 Fall 32b.ii)
in CIA.Subseq
Hi Graham,
Is the event date the accident occurred date or the claim report date ?
1) Error ? No
When? Dec 3, 2013 (the accident date). It is before the Calculation date -> reflect
2) Error? No
When? Feb 1, 2014 (the claim report date) after the calculation date
Different ? yes, before the calculation date. -> reflect
Thank you.
Comments
This exam question was ambiguous. Sample answer 2 in the examiner's report said it is not a subsequent event, but sample answer 3 said it is.
My interpretation is that the event was the accident so the event date is Dec 3. But the definition of subsequent event depends only the when the actuary became aware of it. This was Feb 1 and this date is between the calculation date and the report date, so it should be classified as a subsequent event.
This example is similar, although not exactly the same as example 7 from the source text, "Change in Incurred Value of a Large Loss". If you use the decision tree, the final decision is the inform/disclose if it is a large loss. If it is not a large loss, the actuary doesn't need to take any action because claims often have a reporting lag, and the this claim would be covered by IBNR for AY 2013. If it is a large loss and the IBNR was not sufficient, then this is when it needs to be disclosed. The problem however doesn't provide any information on the materiality of the loss, although $500,000 would be a large loss for most insurers.