The chief financial officer of ACE Group challenged the popular theory that property/casualty insurers “cheat” on loss reserves as they work through market cycles during a presentation at an industry conference last year.
Executive Summary
Reserving philosophy and management integrity in setting reserves were key themes of comments from carrier executives and board members speaking at a recent financial symposium. Speakers offered advice to audit committees about hiring outside actuarial firms and asking the right questions, while a carrier executive challenged theories of cyclical earnings management through reserve actions.“There are people that say there’s a reserving cycle—that as the market softens, reserves soften, and as the market hardens, reserves get more conservative. I don’t believe that generalization,” said Philip Bancroft, chief financial officer of ACE Group, speaking to executives and students during a session of the St. Joseph’s University Insurance Financial Symposium last year.
“You have to understand a particular company’s reserving methodology and philosophy,” Bancroft said, noting that at ACE, it is considered very important to have a reasonable estimate of the reserves.
