Buame-Leyawor, Eugene Kofi (2005) MANAGERIAL AND PROFESSIONAL JUDGEMENT IN GENERAL INSURANCE RESERVING. [Dissertation (University of Nottingham only)] (Unpublished)

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The demise recently of notable blue chip insurance companies and recent investigations of American International Group Inc (AIG) brings to the fore the relevance of using managerial judgement in the preparation of financial statements of insurance companies.

This paper investigates the use of managerial and professional judgement in estimating required claims or technical reserves that are adequate to meet policyholders obligations in general insurance companies. The motivations influencing the assumptions on which managerial judgement is based are analysed.

Prior studies indicate that taxation, auditor quality and size, regulatory requirements, size of insurance companies and the need to present favourable financial statements are some of the factors that influence management in the reserving process. The theory of earnings management in general and the influence it has on management of insurance companies in their choice of parameters used in actuarial models to determine reserves were examined.

Interviews conducted with senior managers of insurance companies provided evidence that managers use reserving to achieve dual but conflicting objectives of making a return for shareholders and solvency, the ability to meet obligations to policyholders. Further evidence however provided that management in the reserving process use their discretion based on professional and managerial judgement and experience to vary reserving results from actuarial models and decides on the ultimate reserves amounts to incorporate into financial statements.

Item Type: Dissertation (University of Nottingham only)
Keywords: General Insurance, Accounts, Reserve
Depositing User: EP, Services
Date Deposited: 06 Jan 2006
Last Modified: 27 Sep 2016 16:47

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