The Actuarial Standards Board of the American Academy of Actuaries approved an exposure draft of a proposed revision of Actuarial Standard of Practice (ASOP) No. 30, now titled Profit Margins and Contingency Provisions in Property/Casualty Risk Transfer and Risk Retention. The ASOP applies to actuaries when performing actuarial services with respect to developing or reviewing profit margins and contingency provisions that are included in future cost estimates for all forms of prospective property/casualty risk transfer and risk retention.
Notable changes from the existing standard include broadening the scope in section 1.2 from estimating the cost of capital and evaluating the underwriting profit and contingency provisions to developing overall profit margins and contingency provisions; adding definitions of profit margin, risk margin, risk retention, and risk transfer; clarifying the difference between a profit margin and a contingency provision; and clarifying guidance regarding taking the cost of capital into account when developing the profit margin.
The comment deadline is November 1, 2024. Information on how to submit comments can be found in the draft.
