The Statement of Actuarial Opinion, or SAO, is a professional assessment of a company’s reserves provided by a credentialed actuary. It is designed to evaluate the adequacy of an insurance company's reserves, or the funds it sets aside to pay future claims. Insurance regulators, one of the key audiences for the SAO, care about the solvency of an insurance company. SAOs, therefore, are critical for ensuring that insurers maintain sufficient reserves to meet their obligations, protecting policyholders and maintaining trust in the insurance market.

This past December, I had the opportunity to attend the annual American Academy of Actuaries (AAA) Seminar on Effective P/C Loss Reserve Opinions in New Orleans. The seminar sessions included information on the latest standards and regulation related to SAOs as well as guidance for appointed actuaries on navigating unique situations as a company’s opining actuary.

The seminar’s instructors provided information on the tools available to successfully prepare SAOs, including the National Association of Insurance Commissioners (NAIC) instructions and the Committee on Property & Liability Financial Reporting (COPLFR) Practice Note which provides practical guidance on preparing an SAO. As someone who assists in the preparation of many company SAOs, I found the seminar very insightful, interesting and helpful.

Professionalism was a central theme over the course of the two-day seminar. Our profession has a Code of Professional Conduct that identifies professional and ethical standards for practicing actuaries. The Actuarial Standards of Practice (ASOPs) are numbered guidelines, developed by the Actuarial Standards Board (ASB), to ensure that actuaries in the United States adhere to high-quality professional standards when providing actuarial services.

In New Orleans, seminar moderators recommended that opining actuaries ensure they review all ASOPs that apply to the scope of work, but put additional focus on ASOP Nos. 1 and 36 before providing an SAO this year-end. ASOP No. 1, “Introductory Actuarial Standard of Practice,” is a foundational introduction, defining the purpose of the ASOPs, defining terms, etc. But ASOP 36, however, is related specifically to property/casualty SAOs and was revised just this past October.

Key takeaways from the seminar were discussions of changes in requirements to SAOs for year-end 2024. One notable example was that, while an appointed actuary (AA) is required to provide qualification documentation to the company Board of Directors on appointment, the AA is now no longer required to provide qualifications to the Board of Directors annually.

Additionally, a revision to ASOP 36 now clearly requires three key dates be disclosed in an SAO: an accounting date, valuation date and review date. These changes emphasize the importance of an actuary staying up to date on current regulatory requirements as well as the Code of Professional Conduct and ASOPs.

An opining actuary may encounter a number of diverse situations while preparing an SAO. One helpful highlight from the AAA seminar were workshops discussing different opinion situations, and how an appointed actuary could approach each. Workshop attendees listened and engaged in constructive dialogue and conversation as hypothetical scenarios were discussed and analyzed. There were many different considerations and was it thought provoking, providing opportunity to reflect on some of the practical applications for opinions on which I’ve worked.

The AAA seminar helped deepen my understanding of SAO requirements. It highlighted the resources and tools that are available to actuaries and included helpful approaches to different scenarios that one could encounter while preparing SAOs. Personally, I feel very equipped on updates and new requirements for SAOs for this year-end and I would highly recommend this seminar to any actuary that signs opinions or assists in their preparation.

But there is always more about SAOs to discover! In fact, you can further your knowledge on SAOs by joining Pinnacle for our January APEX Webinar titled “Statements of Actuarial Opinion at Year-End 2024” on Thursday, January 16.