Actuarial Assistance in Captive Reserve Determination

This technical report discusses the role of actuaries in determining appropriate reserves for captives in the insurance market. It outlines the necessity for captives to establish adequate insurance reserves as liabilities for financial reporting. The report details how actuaries provide estimates for 'incurred but not emerged' (IBNE) reserves through actuarial risk analysis, which is crucial for regulatory compliance. The document explains the components of unpaid claims liability on a captive's balance sheet, including unearned premium reserves and unpaid losses. It describes the various methodologies actuaries may use to estimate unpaid claims reserves, emphasizing the importance of inputs and assumptions in the analysis. Additionally, the report addresses considerations such as discounting, risk margins, and the financial reporting process, including the certification of reserves to insurance regulators. The report highlights the significance of actuarial functions in supporting captive management and ensuring compliance with applicable standards.