Final answer:
True, SAP requires management to record the best estimate of the liability for property and casualty reserves. The best estimate is intended to reflect a realistic and conservative prediction of future claims and claim-related expenses.
Step-by-step explanation:
The statement is true. Under Statutory Accounting Principles (SAP), which are the set of accounting rules prescribed for insurance companies in the United States, management is required to record what is known as a best estimate of their property and casualty (P&C) reserves. This best estimate is the amount that management believes will be sufficient to pay for all the claims and claim-related expenses that will ultimately be incurred for the events that have happened up to the date of the balance sheet.
The requirement for a best estimate under SAP is to ensure that the company's financial statements present a realistic and conservative view of the company's liabilities. This is to protect policyholders and give accurate information to regulators, policyholders, and investors. It is important to note that 'best estimate' does not mean 'exact amount,' but rather a responsible prediction based on available data and actuarial methods.