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The Lloyd's Reinsurance to Close Process

Published online by Cambridge University Press:  10 June 2011

D.J. Hindley ,
M. Allen ,
A.J. Czernuszewicz ,
D.C.B. Ibeson ,
W.D. McConnell  and
J.G. Ross
D.J. Hindley
Affiliation:
Bacon & Woodrow, Parkside House, Ashley Road, Epsom, Surrey, KT18 5BS, U.K.; E-mail: david.hindley@bacon-woodrow.com
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Abstract

General insurance syndicates at Lloyd's are required to obtain a Statement of Actuarial Opinion (SAO) in relation to their solvency reserves. This paper focuses on the reinsurance to close (RITC) process at Lloyd's, which is not currently subject to such opinions although some Lloyd's syndicates choose to obtain informal opinions from actuaries in relation to RITC. The paper analyses the current RITC process and suggests two types of opinion that actuaries could provide in relation to RITC. We also consider briefly financial condition opinions for Lloyd's syndicates. The International Accounting Standards Committee (IASC) published their issues paper on insurance accounting during the drafting of this paper, and we include some consideration of the application of the IASC's fair value concept to the future claim liabilities of Lloyd's syndicates. Lloyd's may be subject to unprecedented changes in the next few years, and we therefore consider the effect of these potential changes both on the existing actuarial solvency opinions and on our suggested opinions in relation to RITC. Our aim is to carry out an objective analysis of this unique reserving process and to offer suggestions as to how actuaries might add value to the process, taking into account how Lloyd's might change in future. Because of these changes, much of the paper has direct application to non-Lloyd's insurance companies.

Keywords

Reinsurance to Close (RITC)Statement of Actuarial Opinion (SAO)ReservingLloyd'sReinsuranceCommercial PremiumTransfer of LiabilitiesFair Value AccountingFinancial Condition Reporting
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 6 , Issue 4 , 01 December 2000 , pp. 651 - 720
Copyright
Copyright © Institute and Faculty of Actuaries 2000

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