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ARTICLE · 09 OCTOBER 2013

Insurer Beats IRS In Actuarial Battle

Reinhart, Boerner, Van Deuren SC
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In a Tax Court decision issued on September 4, Acuity Insurance lodged a victory against the Internal Revenue Service in a case which involved dueling actuarial opinions.

United StatesAccounting and Audit
Timothy Muth
Timothy Muth
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In a Tax Court decision issued on September 4, Acuity Insurance lodged a victory against the Internal Revenue Service in a case which involved dueling actuarial opinions. Acuity v. Commissioner, T.C. Memo. 2013-209 The IRS had asserted that Acuity owed more than $31 million in additional federal income tax on income which was wrongfully suppressed by unreasonable additions to loss reserves. Acuity defended that its reserves were reasonable, developed by an appropriately qualified actuary and computed in accordance with Actuarial Standards of Practice and NAIC requirements..

The case involved the testimony of multiple actuaries for both the IRS and Acuity. The decision of the Tax Court presents a nice description for the lay person of the task of the actuary in establishing loss reserves for a property and casualty company, including the inherent variability of that task.

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