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Introduction of Reserve Method Objects (February, 2007)

Article Summary:

AXIS 12 marks another significant step forward in terms of convenience and control with the introduction of the new Reserve Method object in all of the liability modules of AXIS.


AXIS 12 marks another significant step forward in terms of convenience and control with the introduction of the new Reserve Method object in all of the liability modules of AXIS. 

What is the Reserve Method Object?

Because reserves in AXIS are so flexibly defined, there were a myriad of switches in each Reserve section in AXIS 11 that supplemented the basic Reserve Method selected.  With the need to support GAAP, Statutory and Tax methods, both current required and historically used in Canada, United States and in other countries, Reserve Assumption sections in AXIS Cells were getting quite long.  Since each company tends to look at a given reserve method is a consistent way across its product lines, the new Reserve Method object now allows you to create and name a small number of Reserve Methods for each accounting purpose, and use these consistently in all liability cells, thus increasing control and convenience, while reducing the size of AXIS cells considerably. 

The Reserve Method object is used in each of the 6 Reserve Sections in the Cell Assumption screens of the Insurance and Annuity modules.  All of the switches and scalar fields previously used in the Reserve sections to select the basic reserve calculation method, and to specify the options and variations on that method are now defined within the Reserve Method, thus reducing the size of the Cell Assumptions screen by anywhere from 72 to over 400 fields according to the Module. 

In creating the new Reserve Method object, we also took the opportunity to reorganize the switches and scalars somewhat, so as to group fields together according to purpose and use.  For example, there are specific groupings of fields related to CRVM/XXX and US GAAP options, and for various benefits or assumptions that can be included or excluded from the reserve calculation, depending on the method selected.

Note that the Reserve Method deals only with methodology issues defined primarily using switches, and not with any reserve assumptions which currently remain controlled by the Cell Assumptions.

How Will Reserve Method Objects Help You?

While the change to the new format is significant enough to warrant some review and preparation prior to upgrading existing datasets to AXIS 12.0, there are a number of valuable benefits of the new structure of AXIS assumptions:

  • The effort to create and add new Cells will  be reduced, and the assurance of consistency of reserve approaches selected within all Cells will be much greater, since each type of reserve required in the Cell (Tax, Stat, etc.) can now be defined by one selection of an existing object.  Once users have decided which combination of switches defines a reserve method appropriately for their business and their company practice, the corresponding Reserve Method object can be named appropriately and saved, and used repeatedly in additional cells.
  • The Reserve Method is contained in a separate object, which should rarely need to be adjusted once defined.  Accordingly, it can be set as protected or super-protected for increased assurance and control.  This was not possible when reserve methodology assumptions were part of the Cell, unless the whole Cell could be protected.
  • When a change in the reserve calculation methodology is required as part of an investigation of either a completely different method (GAAP vs. Stat) or a minor revision to the basic methodology, Cells can now be easily updated with a simple Cell override replacing the former Reserve Method with the new one.
  • Review and documentation of Reserve Methods used in a dataset are now much easier and quicker to accomplish.  The small number of Reserve Method objects actually used can be individually reviewed and validated, and the confirmation of their selection by Cell is much simpler than was required before Reserve Method objects were available, when hundreds of switch settings would have to be listed and compared for all cells.

Preparation for an Update to AXIS 12

As with most version upgrades of AXIS, installation of AXIS 12.0 will cause any datasets opened by AXIS to first be converted to the internal data structures required by the new functionality. As always, AXIS will prompt before performing this conversion, which is non-reversible, and will also remind users to create dataset backups first as a standard precautionary measure.

With no major structural change incorporated in AXIS 12, these dataset conversions are expected to be as smooth and straightforward as ever, and Cells should produce the same calculated results after the conversion as they did before. However, because Reserve Method objects did not exist before the conversion, AXIS will automatically create new Reserve Methods and will assign them generic names.  Accordingly you will likely want to allow a little more time for an upgrade to AXIS 12, in order to clean up datasets of extraneous data, and ensure the consistent use of Reserve Methods with meaningful and appropriate names going forward. 

Additional explanation and advice on useful approaches to this upgrade issue can be found in the related KB article below:

 

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