Services

Regulators

Pinnacle recognizes that state regulators often walk a tightrope between protecting consumers and encouraging business growth. Whether it’s a need to determine suitability of proposed rates, identify if a company’s loss reserves are actuarially sound, determine if market availability and affordability needs are being met, understand the impact proposed legislation will have on a market or any of a wide range of other requirements, you need a partner with the skills and insights to help you fulfill your responsibilities to your constituents.

Pinnacle has the background and expertise necessary to help you find the right solutions for your toughest challenges. Whether it’s expert testimony, loss reserving, financial modeling and testing, rate filing reviews, assistance with governmental insurance programs or legislative costing and market analysis, we provide an experienced, in-depth and up-to-date knowledge and expertise. More importantly, we understand the intricacies of governmental requirements, including meeting tight timelines and following unique procedures, and strive to communicate complex actuarial topics in plain language.

Our actuaries have worked in state insurance departments and other state agencies as employees and consultants, and are focused on providing you with valuable intelligence that comes from similar work for other regulators. Our industry background includes:

  • Assistance forming and maintaining government insurance programs
  • Comparison of state insurance results versus other states
  • Costing of proposed legislation and evaluating the results of enacted laws
  • Development of industry closed claims databases
  • Industry reviews of coverage availability and affordability
  • Review of captive applications
  • Self insurance capital requirements
  • Review of rate filings
  • Risk management assessments
  • Support of financial examinations

Publications and Media

January 2017 APEX Discussion Series
Statements of Actuarial Opinion Year-End 2016
Authored by Joseph A. Herbers and Aaron N. Hillebrandt.

Accounting and Actuarial Services: A Case for Peer Review
Best's Review January 2016 - Issues and Answers
Authored by Derek W. Freihaut.

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Case Studies

Medical Malpractice Damage Caps
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Medical Malpractice Damage Caps

A state insurance regulator asked Pinnacle to determine the potential impact of several proposed tort reforms, including a change to non-economic damage caps for medical professional liability claims. Pinnacle worked with medical society to identify the most appropriate claims databases for assessing the potential legislative change. Our detailed analysis not only considered data from that state, but several others to stress test the results and provide a range of reasonable outcomes. In many cases, the specific reform’s effect, for example “I’m Sorry” legislation, was very difficult to isolate. Through this industry analysis, we identified differences well beyond a simple loss limitation to provide a more complete review of potential environmental changes that could be expected in the state.

This comprehensive analysis helped our client identify the effect of various legislative options, which empowered them to be a strong voice in the legislative debate and to influence policymaking in the state.

Rate Filing Review
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Rate Filing Review

Pinnacle typically provides state regulators expert review of company and bureau rate change filings. In a recent review of a Company’s automobile rate filing Pinnacle was able to confirm that the filed rates met the State’s rating laws and Department’s filing requirements. Using a procedure developed by Pinnacle specifically to review rate filings, the Company filing was reviewed against generally accepted actuarial principles. The Company was questioned on certain rating procedures and was able to support their procedures and selections with additional documentation to the filing. Pinnacle was then able to affirm to the Regulator that the filed rates were not excessive, inadequate, nor unfairly discriminatory and that the new rates would not produce any major policyholder dislocations. The Regulator was then able to acknowledge the Company’s filing with confidence that the Regulator had carried out his charge of providing service and protection both to consumers and to the insurance industry.

U S Domestic Statement of Actuarial Opinion
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U S Domestic Statement of Actuarial Opinion

Domestic U.S. property/casualty insurers and risk retention groups are required to file an Annual Statement with state regulators each year by March 1. Part of that filing includes the submission of a formal Statement of Actuarial Opinion (SAO) by a qualified Appointed Actuary as to the reasonableness of held loss and loss adjustment expense reserves. The SAO must be one of five types:

  • Reasonable
  • Inadequate/Deficient
  • Excessive/Redundant
  • Qualified
  • No Opinion

In addition to the SAO, most jurisdictions require an Actuarial Opinion Summary (AOS) providing more detail on the Appointed Actuary’s specific findings by March 15. Lastly, a formal report narrative in support of the SAO and AOS is required to be available by May 1.

As the SAO is a compliance document, the primary audience is state regulators but the individual company must arrange for the service to be provided.

A recent SAO for one of our clients touched on many of the required disclosures:

  1. The adequacy of held reserves on a net basis were below the low end of our range of reasonable reserves until we took into account anticipated salvage and subrogation recoveries.
  2. The unearned premium reserves for long duration contracts were substantial and we conducted a review to determine they were adequate
  3. The Company held material loss and loss adjustment expense reserves for pools and associations. In order avoid having to issue a Qualified Opinion, we separately computed indicated reserves for two of the pools/associations, and obtained an SAO from the Appointed Actuary for the National Workers Compensation Reinsurance Pool.
  4. Reinsurance recoveries were in doubt for certain carriers as balance were sometimes overdue by more than 90 days. After reviewing the reinsurers’ A. M. Best ratings, we made the required disclosures about reinsurance collectability. 

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