Principles for Doing Business at Lloyd's P6.5: 6.5 Periodic, objective challenge of reserving processes and assumptions

Reserving processes and assumptions are challenged periodically and objectively, covering experience analysis, process challenge, assumptions challenge and validation. Baseline: actual versus expected and ultimate loss ratio development analysis at suitable granularity with changes explained; external audit review with tracked recommendations; an internal audit plan testing reserving; periodic Actuarial Function self-assessment; independent peer review under APS X2; clear signposting of assumption changes to the board; a robust validation procedure with objective challenge of material movements and key outputs. Higher levels add triggers for investigation, longer-period actual versus expected analysis, independent third-party process reviews, sensitivity testing, reserve risk limits and discussion of the independent review at audit and risk committees.