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...

Full description

Saved in:
Bibliographic Details
Main Authors: Kamiya, Shinchi, Milidonis, Andreas
Other Authors: Nanyang Business School
Format: Article
Language:English
Published: 2021
Subjects:
Online Access:https://hdl.handle.net/10356/149098
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Nanyang Technological University
Language: English
id sg-ntu-dr.10356-149098
record_format dspace
spelling 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
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic Business::Finance::Actuarial science
Business::Finance::Insurance
Business::Accounting
Casualty Insurance Industry
Insurer Reserve Error
spellingShingle Business::Finance::Actuarial science
Business::Finance::Insurance
Business::Accounting
Casualty Insurance Industry
Insurer Reserve Error
Kamiya, Shinchi
Milidonis, Andreas
Actuarial independence and managerial discretion
description 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.
author2 Nanyang Business School
author_facet Nanyang Business School
Kamiya, Shinchi
Milidonis, Andreas
format Article
author Kamiya, Shinchi
Milidonis, Andreas
author_sort Kamiya, Shinchi
title Actuarial independence and managerial discretion
title_short Actuarial independence and managerial discretion
title_full Actuarial independence and managerial discretion
title_fullStr Actuarial independence and managerial discretion
title_full_unstemmed Actuarial independence and managerial discretion
title_sort actuarial independence and managerial discretion
publishDate 2021
url https://hdl.handle.net/10356/149098
_version_ 1772828078313046016