Missing the 7th case - Change in Incurred Value of a Large Loss

jc2018jc2018
in CIA.Subseq

It seemed that you missed the 7th case and skipped to the 8th case - change in industry benchmark.

Comments

  • grahamgraham

    That case was added in Fall 2017 to the updated version of the subsequent events reading and I actually just forgot to include it. But now that I think about it, it might be a better exercise to read it on your own and summarize it the way I've done with the others. (I'm a lazy instructor!)

  • oxalisoxalis

    May I know if this correctly summarizes the 7th case?

    Facts:
    • event: mid-Jan
    • actuary became aware: Feb 5th
    • subsequent event? yes, actuary became aware after CalcDt (12/31) & before RptDt (after Feb 5th)

    Branch: middle

    Action: EWDP - inform only
    • Error? No, go to next question
    • When? after the calculation date of December 31, go to the next question
    • Different? the entity is different after the calculation date, go to the next question
    • Purpose? report on entity as it was-->Final decision: inform only

  • grahamgraham

    I think you're correct right up until your final decision. The example in the text presents 2 possible conclusions:

    • If the IBNR is sufficient to absorb the change then this would be considered a normal part of business and it is not even necessary to disclose the change in value of the large loss.
    • But if the IBNR is not sufficient, then the change should be disclosed.

    As you said, the answer to the "Purpose" question would be "report on entity as it was". Normally you would disclose (same as inform) but if it's part of normal business, you would not even have to inform. (In general, there are probably lots of little things like this that are part of normal business, and it isn't necessary to put every little thing into the report.)

    I'm going to link to your post from the wiki so others can compare their answers. Thanks for posting this!

  • oxalisoxalis
    edited September 2021

    Shall we always add a note relating to materiality before jumping to the conclusion for each case just to be safe?

    For example: change in investment markets
    FINAL ACTION: instead of informing only, shall we put: if the value drop is significant then inform, if change not material then no action required ?

  • grahamgraham

    I believe you are correct. If the the event is not material, you shouldn't have to do anything (usually). One exception would be if there was a significant event like a hurricane and even if your company had no exposure, you should probably state that fact. Otherwise readers of the annual report might think you just forgot to mention it.

    Having said that however, I think you should definitely make a statement as you indicated in your post. In fact, I might even say something like this:

    • Even if the event is not material, it may be prudent to provide disclosure. This would be up to the judgment of the appointed actuary and depends on circumstances.
  • user1user1
    edited March 2023

    Right before making a final decision, why should materiality be questioned again? if the event is not material, then the decision tree would not be used in the first place. So for the change in IL example, these changes are part of regular business (and that IBNR is sufficent) , so not material and thats it.

  • Staff-T1Staff-T1

    I think you are right here @user1 -> If the event is not material you wouldn't have to go down the tree. The fact that you are going down the tree itself reflects that the even is material. Also, the example itself states that the change in incurred loss in in excess of the materiality standard

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