Management accounting of insurance company - Myassignmenthelp.Com

Questions: 1. Being a student of Insurance Accounting, you must be aware of the term Loss reserve that is an estimate of an insurers liability from future claims. Loss reserves are typically comprised ofliquid assets, and theyallow the insurer to cover claims made against policies that it underwrites. While estimating the loss reserves what factors does insurance company takes into account. Discuss also the Components of Loss Reserves. 2.The primary role of a Loss Reserve Specialist is to opine on the adequacy of the loss and loss expense provisions, reflected in insurers statutory financial statements. What Criteria that can be considered in determining whether an individual qualifies as a loss reserve specialist. 3. State the factors to be taken into considerations for loss reserve auditing procedures. Answers: Answer 1 The issue presented in the question is that loss reserve refers to the estimates of the ability of the insurer in regards to the future claims. It has been further mentioned in the question that the loss reserves comprises of the liquid assets and they permit the claims that have been made against policies that has been underwritten. Therefore, the major issue that has been asked in the question is that the factors that insurance company takes into account while estimating the loss reserves are as follows: Duration of the policy the coverage term of the insurance should be assessed as to whether it is for a short duration or not. It is upon the discretion of the insurer that he can either renew the contract or adjust the provisions of the future. It must be noted here that the some of the policies may also be considered to be of a shorter duration irrespective of the fact that the duration is more than one year. The particular lines of business that are considered are property businesses, liability insurances and risk types like the credit risks and fidelity risks The businesses that can be further classified as primary coverage or reinsurance are also considered The components of loss reserves are as follows: Case basis reserves the case basis reserves refer to the reserves that the insurance entity has not paid on the date of the financial statement Incurred but not yet reported this component refers to the estimated cost that had occurred but had not been reported on the date of the financial statement. Answer 2 The factors that can be considered while determining whether an individual qualifies as a loss reserve specialist are: The individual should possess the knowledge in regards to various projection techniques The individual should also possess the knowledge in regards to the changes in the environment He should have knowledge about developments in regards to the regulations that pertains to this particular field He should know about the trends that are legal and social in nature He should possess the knowledge about the decisions in the court rooms He should know about the effects that the factors impose on the cost in regards to the claims Answer 3 As mentioned in the question the factors that should be taken into consideration for loss reserve auditing procedures are as follows: The effects of changing the relevant activities in regards to the entity should be considered Major events like mergers, acquisitions and dispositions The reinsurance program in regards to the entity should also be considered The turnover in regards to management should be considered The changes in the IT system that may occur in the due course of business also has to be considered The changes in the process that may occur in the due course of business also should be considered