Long-term disability (LTD) claims do not behave like most property and casualty liabilities. Their ultimate cost is driven primarily by how long a claimant remains disabled and the resulting stream of future benefit payments, rather than by traditional claim-development patterns.
In a new contributed research paper, Minaz H. Lalani examines how actuarial reserving methods can better reflect these characteristics. Reserving for Long-Term Disability Claims in a Property and Casualty Insurance Environment: A Hybrid Framework Integrating Tabular Cash-Flow Valuation and Development-Based Diagnostics proposes using claimant-level cash-flow valuation as the primary reserve estimate, with development-based methods retained to monitor experience and test the reasonableness of results.
The paper also explores the governance implications of this approach, including the importance of reconciling claimant-level reserves with aggregate development diagnostics and drawing on expertise from both P&C reserving and disability valuation.
Share your research with the actuarial community
The CIA’s research program gives members of the Canadian actuarial community an opportunity to publish research of interest to Canadian actuaries. The program welcomes contributed papers from every area of actuarial practice, including research that informs actuarial policy.
Have research or insights to contribute, or an idea to share about research topics? Contact us to learn more.
Minaz Lalani is Managing Principal of Lalani Consulting Group Inc. He held the FCIA and FSA designations from 1985 to 2021 and has over 35 years of experience in life and property and casualty insurance. He served on the CIA Board from 2014 to 2019, presented at CIA sessions, and authored actuarial research papers.