Which factor should the actuary consider when there is insufficient historical data?

• A. Whether there is adequate data to evaluate the reserves
• B. If industry data or another company's data were used, is this data reasonably similar to the company for which the actuary is providing an opinion
• C. Whether to provide disclosures about the data used
• D. Whether to provide disclosures about the resulting variability & uncertainty

Answer: (A)

When data is sparse, the most important thing to check is whether the available information is enough to support a credible reserve estimate. If there isn’t adequate data to evaluate the reserves, any estimate becomes unreliable, regardless of other considerations. That’s why the primary factor is data adequacy.

If you do have enough data to proceed, you can explore supplementary approaches (like using external industry data) and clearly disclose limitations and uncertainties as needed. Disclosures about the data or about the resulting variability matter, but they don’t resolve the fundamental issue: without sufficient data, you can’t reliably estimate reserves.