ARTICLE
14 August 2013

Reserve Surprises - Sharks Prowl

RB
Reinhart Boerner Van Deuren s.c.

Contributor

Reinhart Boerner Van Deuren is a full-service, business-oriented law firm with offices in Milwaukee, Madison, Waukesha and Wausau, Wisconsin; Chicago and Rockford, Illinois; Minneapolis, Minnesota; Denver, Colorado; and Phoenix, Arizona. With nearly 200 lawyers, the firm serves clients throughout the United States and internationally with a combination of legal advice, industry understanding and superior client service.
Legal risk management for actuaries involves recognizing that different types of assignments have different levels of risk.
United States Accounting and Audit

Legal risk management for actuaries involves recognizing that different types of assignments have different levels of risk.  One of the highest levels of risk comes when an actuary's work is part of public securities filings.  

An illustration of this played out with Tower Insurance Group last week.  After the close of trading on Wednesday, August 7, Tower Insurance Group announced it would not make its quarterly filings on time because of loss reserve issues.  During the day on August 8, Tower announced that it was engaging an outside actuarial firm to assist it with review of adverse loss reserve development.  By the end of that day, class action law firms had issued press releases announcing that they were commencing investigations on behalf of investors into potential violations of securities laws.

I have no reason to believe there were any violations of securities laws nor any issues surrounding actuarial estimates of Tower's loss reserves.   I doubt the class action law firms do either.   But any time you see a publicly traded insurance company's stock drop because of reserve charges, the threat of securities law suits looms.

The risk management tip for actuaries is to take care that your name is not mentioned in securities filings or press releases of publicly traded companies.   When the investing public does not know your name, the sharks will have a much harder time turning you into a target or a defendant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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