Welcome to the hotseat. We've prepared a guide if you'd like to read more about how it works.

Clarification on the best estimate approach for setting a basis.

0 votes
asked Nov 9, 2017 in BUS 4027W - Actuarial Risk Management by Rowan (3,200 points)

The best estimate approach does not produce a unique basis. Why is this a problem? Why does it not produce a unique basis as it is based on judgement and judgement is unique?

1 Answer

0 votes
answered Nov 21, 2017 by jolegutko (520 points)

It's not a problem exactly, but it does mean that two actuaries may disagree on what the best estimate is and then come up with two different values for the same liability, which is hard to explain or justify to clients (or may be difficult when trying to agree a price or transfer value)