A company carries $100M in loss reserves. The Appointed Actuary's range runs $95M to $110M. One number decides whether the opinion reads "reasonable," lands the company in regulatory scrutiny, or exposes the actuary to a qualification. This lesson dissects both documents that carry that judgment.
Nearly every property/casualty insurer that files an annual statement must attach a Statement of Actuarial Opinion (SAO). Commissioner-approved exemptions exist for small companies, insurers under supervision or conservatorship, nature of business, and financial hardship. The same exemptions carry over to the AOS. The SAO is a public document. Anyone reading the filed annual statement sees it.
The Actuarial Opinion Summary (AOS) is a separate, confidential document. It is filed with the state of domicile. It carries the numbers the SAO deliberately keeps out of public view.
KEY: Think of the SAO as the verdict and the AOS as the private evidence file. The SAO says whether reserves are reasonable; the AOS shows exactly how close carried reserves sit to the actuary's own estimate.
Common mistakes
- Confusing which document is public. The SAO is public; the AOS is confidential, filed with the domiciliary regulator and shared with other states only on a confidentiality-preserving request. Placing point estimates in the public SAO is the classic error.
- Treating Qualified and No Opinion as the same. A Qualified opinion covers most reserves and excludes one item. No Opinion means the actuary could not conclude at all. Do not merge them.
- Reading RMAD as a statement that reserves are wrong. Reserves can be Reasonable and still carry material adverse deviation risk. The two conclusions are independent.
Bottom line
- The SAO is public and filed with the annual statement in every state; the AOS is confidential and filed with the domiciliary regulator.
- The SAO has four sections: Identification, Scope, Opinion, and Relevant Comments.
- The Appointed Actuary must be a Qualified Actuary appointed by (or authorized by) the board of directors.
- Five opinion types exist: Reasonable, Deficient/Inadequate, Redundant/Excessive, Qualified, and No Opinion.
Exam shortcut
For any opinion-type question, test carried against the range endpoints first: below the low end is Deficient, above the high end is Excessive, inside is Reasonable. Only after that consider Qualified (one item excluded) or No Opinion (cannot conclude). For the AOS adverse-development flag, test each year on its own base: compare that year's one-year development to 5% of its respective prior year-end surplus, then count exceedances.
The full lesson (about 3,108 words, 21 min read) adds 2 worked examples, all 7 common mistakes, a self-check, free in the app.
Learning objectives
- C8
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