Actuarial independence and managerial discretion
Appointed actuaries are responsible for estimating the largest liability on property–casualty insurance companies’ balance sheet. Actuarial independence is crucial in safeguarding accurate estimates, where this independence is self-regulated by actuarial professional institutions. However, professio...
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sg-ntu-dr.10356-1490982023-05-19T07:31:16Z Actuarial independence and managerial discretion Kamiya, Shinchi Milidonis, Andreas Nanyang Business School Business::Finance::Actuarial science Business::Finance::Insurance Business::Accounting Casualty Insurance Industry Insurer Reserve Error Appointed actuaries are responsible for estimating the largest liability on property–casualty insurance companies’ balance sheet. Actuarial independence is crucial in safeguarding accurate estimates, where this independence is self-regulated by actuarial professional institutions. However, professional conflicts of interest arise when appointed actuaries also hold an officer position within the same firm, as officer actuaries also face managerial incentives. Using a sample of U.S. insurers that employ in-house appointed actuaries from 2007 to 2014, we find evidence that officer actuaries have different reserving practices than nonofficer actuaries. This difference in reserving is associated with tax shielding and earnings management incentives. Results are consistent with managerial discretion dominating actuarial independence; they are economically significant and should be of concern to regulators and professional institutions. Accepted version 2021-05-25T06:44:31Z 2021-05-25T06:44:31Z 2018 Journal Article Kamiya, S. & Milidonis, A. (2018). Actuarial independence and managerial discretion. Journal of Risk and Insurance, 85(4), 1055-1082. https://dx.doi.org/10.1111/jori.12199 0022-4367 https://hdl.handle.net/10356/149098 10.1111/jori.12199 2-s2.0-85010223686 4 85 1055 1082 en Journal of Risk and Insurance © 2016 The Journal of Risk and Insurance. All rights reserved. This paper was published by Wiley in Journal of Risk and Insurance and is made available with permission of The Journal of Risk and Insurance. application/pdf |
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Business::Finance::Actuarial science Business::Finance::Insurance Business::Accounting Casualty Insurance Industry Insurer Reserve Error Kamiya, Shinchi Milidonis, Andreas Actuarial independence and managerial discretion |
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Appointed actuaries are responsible for estimating the largest liability on property–casualty insurance companies’ balance sheet. Actuarial independence is crucial in safeguarding accurate estimates, where this independence is self-regulated by actuarial professional institutions. However, professional conflicts of interest arise when appointed actuaries also hold an officer position within the same firm, as officer actuaries also face managerial incentives. Using a sample of U.S. insurers that employ in-house appointed actuaries from 2007 to 2014, we find evidence that officer actuaries have different reserving practices than nonofficer actuaries. This difference in reserving is associated with tax shielding and earnings management incentives. Results are consistent with managerial discretion dominating actuarial independence; they are economically significant and should be of concern to regulators and professional institutions. |
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Nanyang Business School |
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Nanyang Business School Kamiya, Shinchi Milidonis, Andreas |
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Article |
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Kamiya, Shinchi Milidonis, Andreas |
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Kamiya, Shinchi |
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Actuarial independence and managerial discretion |
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Actuarial independence and managerial discretion |
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Actuarial independence and managerial discretion |
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Actuarial independence and managerial discretion |
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Actuarial independence and managerial discretion |
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actuarial independence and managerial discretion |
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2021 |
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https://hdl.handle.net/10356/149098 |
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