Statement of Actuarial Opinion

Every March 1, a US property and casualty company files its annual statement with the regulator of its state of domicile. That filing carries a document signed by a named individual: the Statement of Actuarial Opinion. The Appointed Actuary, appointed by the board of directors, states whether the loss and loss adjustment expense reserves carried on the balance sheet, gross and net of reinsurance, make a reasonable provision. The NAIC instructions set the form: identification, scope and opinion paragraphs, then relevant comments. The opinion falls into a coded category: reasonable, inadequate, redundant, qualified, or no opinion. One section requires the actuary to say whether there is a risk of material adverse deviation and to give the materiality standard used, often expressed as a share of statutory surplus. The Actuarial Opinion Summary, filed separately and confidential, gives what the public opinion leaves out: the actuary's point estimate or range, and the gap to the carried amount. The governing standard of practice is ASOP No. 36 of the Actuarial Standards Board; the underlying figures can be read in Schedule P of the same statement. At Lloyd's, each syndicate also obtains an opinion on its reserves every year, signed by a signing actuary. The setup has a known limit: a wide range lets an amount set at its low end be called reasonable, and the opinion says nothing about where the carried figure sits. In France, the functional equivalent is the opinion of the actuarial function (Article 48 of the Solvency II directive), which goes to the board and not to the public. Not to be confused with the actuarial function itself, nor with RBC capital, which measures required capital and not reserve adequacy.