PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

476 A NEW METHOD OF ESTIMATING LOSS RESERVESTABLE 6Second Hypothetical Cumulative Incurred Loss Data(in $000s)Development Year (j)AccidentYear (i) 0 1 2 3 4 5 61997 2,237 2,369 2,376 2,376 2,376 2,3761998 2,899 2,942 2,936 2,934 2,9341999 2,225 2,330 2,322 2,3252000 2,145 2,205 2,2072001 1,513 1,4992002 1,168TABLE 7Third Hypothetical Cumulative Incurred Loss Data(in $000s)Development Year (j)AccidentYear (i) 0 1 2 3 4 5 61996 1,076 927 927 951 960 1,087 1,0871997 957 1,193 1,312 1,295 1,220 1,3921998 1,421 1,788 2,086 2,236 2,2521999 1,473 1,910 2,235 2,1922000 1,447 1,976 2,4542001 3,578 3,9112002 4,754Table 7 presents similar challenges as some incremental incurredloss amounts are zero and some are negative. The sequenceof incurred losses generated in 1996 and 1997 appear tohave a pattern distinct from those in subsequent years. In addition,it may be incorrect to assume the accident years all have thesame settlement period, i.e., N depends on i. In such cases wherethere are non-positive incremental incurred losses and/or differentclaim settlement periods, the ultimate incurred loss for accident