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In-House Provision of Corporate Services: The Case of Property-Casualty Insurers and In-House Actuarial
Loss Reserve Certification

4.1 Data
The main data sources for this research are Best’s Insurance Reports -- Property/
Casualty Edition, the NAIC annual statement database, and proxy statements of the
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publicly-traded insurers. Observations are at the company level rather than the group

level, which are consistent with most prior research. We obtain information of actuaries
from Best’s Insurance Reports -- Property/Casualty Edition (in various years) and cross-
check with information in the insurer’s annual statement. Data from the same source as
for the actuary information is used to find organizational form and ownership structure as

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well. We determine the loss reserve errors from Schedule P, Part 2 of the insurers’ annual
statements. As for data to determine whether a state has stringent rate regulation, we
acquire from Harrington (2002), Grace and Phillips (2008), and the NAIC’s Compendium
of State Laws and Regulations on Insurance Topics for 2011 (National Association of

Insurance Commissioners, 2011). We obtain all other remaining variables from the NAIC
annual statement database.

4.2 Sample Selection

The original sample of this study consists of all P-C insurers with loss reserving data
for our sample period 1999 to 2010. Then we eliminate firms that have extreme errors
in their loss reserves (i.e., observations with an original loss reserve estimate that differs
from the revised estimate by greater than 50% in absolute value) from the sample. In
addition, we exclude firms that cede all premiums to reinsurers and/or write greater than

25% of their premiums in workers compensation, accident and health, surety, credit, and/
or reinsurance as well. (See Petroni, 1992.) This screening process for our data parallels
that of Gaver and Paterson (2014), Grace and Leverty (2010, 2012), and Petroni (1992),

among others.
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30 Best’s Insurance Reports -- Property/Casualty Edition is published annually by the A. M. Best Com-
pany (A. M. Best Company, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010,
2011).
31 If these sources did not reveal the ultimate owner of an insurer, we further checked the insurer’s
website and news sources on the internet.
32 The initial number of observations from 1999 to 2010 is 16,877. Missing data regarding whether
an in-house actuary is used or not reduces the sample to 16,091. The requirements that insurers be

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