Challenge
A Gibraltar-based general insurer writing a range of personal and commercial motor business through multiple entities faced significant complexities in its reserving process. The company manages a large number of reserving segments and complex data sources, and recently changed their approach to reserving large losses. Alongside this, external changes such as the impact of COVID-19 on claim frequencies, inflationary pressures, whiplash reforms and changes in personal injury discount rates diminished the relevance of historical data.
Approach
Streamlined segmentation analysis: With our internal reserving software and efficient processes, we quickly projected and reviewed the client’s large number of segments. This ensured consistency of patterns and assumptions across comparable segments.
Projections and assumptions: We independently modelled the impact of changes in the personal injury discount rate on the company’s reserves using internal claims data, Ogden tables and market statistics. We arrived at an independent view of claims inflation using external price and wage inflation indices in comparison with internal claims inflation data.
Collaborative insights: We met with the claims team to understand recent changes in the large loss-reserving process. We engaged with the pricing team to capture recent underwriting changes. We maintained open discussions with the client to understand and explain differences between our estimates and the internal view, making allowances in our projections for further credible and relevant information provided.
Sensitivity testing and stochastic reserving: We carried out sensitivity testing on key assumptions such as inflation rates, development patterns and prior estimates to demonstrate how results are impacted under different scenarios. We also applied stochastic reserving methods to illustrate reserve variability and highlight uncertainties in the underlying claims data.
Impact
Comprehensive reporting: Milliman delivered a report detailing our work, methodology, assumptions and findings. The report included a discussion of uncertainties and highlighted the differences between our estimates and the company’s own projections.
Ongoing support: The client consistently selected us to perform this work each year, relying on our expertise to aid the company through various organisational transitions while maintaining confidentiality.
Continuous enhancements: With extensive experience accumulated over a number of years, we continuously refine and optimize our reserving processes to meet the insurer's evolving requirements.