Some examples of major risk factors include Asbestos or Environmental Liability, Tobacco, Cumulative Injury, Coverage Disputes, etc. This report should be understandable to company management. The exhibits should display the raw data, and then in a step by step fashion all of the calculations performed on the data. The final calculation will result in estimates of the required reserves for the four annual statement values examined in the actuarial opinion. Often the estimates will be accompanied by a stated range of reasonable estimates.
State regulations require that the opining actuary compute a range of reasonable estimates.
The opining actuary must provide a favorable actuarial opinion to any reserve amount booked that falls within that range even if the booked reserve amount is lower or higher than the actuary's estimate. A range of estimates that would be produced by alternative sets of assumptions that the actuary judges to be reasonable, considering all information reviewed by the actuary. Note that the range of reasonable estimates is narrower, perhaps considerably, than the range of possible outcomes of the ultimate settlement value of the reserve. The text portion of the report provides a written explanation of the calculations and data contained in the exhibits. It also usually describes how any unique or changing business conditions were considered in the analysis.