DOWNLOAD THE COMPLETE PROJECT

24 Users found this project useful

Effect of Actuarial Assumption Governance on Insurance Liability Estimates

Abstract

Actuarial assumptions are fundamental to the measurement of insurance liabilities because they provide estimates of future events and financial conditions that affect insurance contract obligations. Assumptions relating to mortality, claims frequency, claims severity, expenses, lapse rates, inflation, and discount rates can materially influence liability estimates. Effective actuarial assumption governance is therefore important for ensuring that assumptions are appropriately developed, reviewed, documented, and applied in insurance liability measurement. This study examines the effect of actuarial assumption governance on insurance liability estimates. The study will assess how the processes used to establish, review, approve, monitor, and update actuarial assumptions influence the reliability and consistency of estimated insurance liabilities. It will focus on how governance practices surrounding actuarial assumptions affect the measurement of insurers’ future obligations. The study will consider factors such as assumption development procedures, review frequency, approval processes, documentation quality, data quality, assumption monitoring, validation procedures, mortality assumptions, claims assumptions, expense assumptions, and discount rate assumptions. These factors will be examined to determine how differences in assumption governance affect insurance liability estimates and the sensitivity of liabilities to changes in actuarial assumptions. A quantitative research approach will be adopted for the study. Relevant insurance liability and actuarial assumption data will be analysed using descriptive statistics, actuarial valuation techniques, sensitivity analysis, and regression analysis. Alternative assumption governance scenarios will be evaluated to determine their effects on estimated insurance liabilities and to assess the extent to which changes in assumption governance influence valuation outcomes. The study is expected to reveal that effective actuarial assumption governance may improve the reliability and consistency of insurance liability estimates. Strong review, approval, documentation, monitoring, and validation processes may reduce inappropriate variations in assumptions and improve the quality of liability measurements. The findings may also indicate that weaknesses in assumption governance can contribute to inconsistent or potentially unreliable liability estimates, particularly where assumptions are sensitive to changes in claims and economic experience. The study will be useful to actuaries, insurance companies, regulators, financial managers, auditors, and other stakeholders involved in insurance liability measurement and financial reporting. It may provide useful information for strengthening actuarial governance frameworks, improving assumption-setting processes, enhancing liability measurement, and supporting more transparent and reliable financial reporting. The study concludes that actuarial assumption governance is an important component of reliable insurance liability estimation because the quality of assumptions and the processes used to govern them can influence measured insurance obligations. It is therefore recommended that insurers establish clear assumption governance procedures, maintain reliable supporting data, conduct regular reviews and validations, document material assumptions adequately, and update assumptions when emerging experience indicates that changes are necessary.

Keywords: Actuarial assumption governance, insurance liability estimates, actuarial assumptions, insurance liabilities, assumption setting, assumption review, assumption validation, mortality assumptions, claims assumptions, expense assumptions, discount rates, actuarial valuation, liability measurement, model governance, insurance financial reporting.