PRA Dear CEO letter – feedback from recent PRA reserving reviews
- Dear CEO letter is focused on feedback from recent PRA reserving reviews; it is dated as 5 November 2019
- This letter is addressed by the PRA to Chief Actuaries of general insurance firms regulated in the UK
- The PRA wrote this letter to share insights from its further reviews of firms’ reserving during 2019. This has included work on casualty lines for London Market firms, reserving in the UK motor market and a thematic review of case (outstanding claims) reserves in the retail and wholesale markets.
- The PRA’s conclusions have been informed by wider supervisory interactions with firms and other stakeholders such as Chief Actuaries, Lloyd’s and signing actuaries.
- The PRA also wrote on the same day to CEOs of UK general insurance firms with some more general observations of recent supervisory work, and that letter also refers to some of the main findings discussed here.
The PRA’s letter covers key topics:
- Bias in reserve assessment
- Weakening of case reserving basis
- Inadequate claims inflation allowance
- Attritional loss deterioration
- Transparency over key judgements and assumptions in management information (MI)
- Other relevant areas of uncertainty
Timeline with relevant dates to be logged on regulatory calendar
- Letter is dated as 5 November 2019
The PRA expects that each Chief Actuary will bring this letter to the attention of your audit and/or reserving committee and that firms will make explicit reference to how they have considered the findings in the main body of this letter in their 2019 year-end reserving exercises and associated actuarial reports.