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

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478 A NEW METHOD OF ESTIMATING LOSS RESERVESto better fit the data from the later years in Tables 7 and 8 thanthe uniform random split.6. SUMMARY AND CLOSING COMMENTSFor new lines of business, the practical approach to loss reservingrequires the actuary to make his/her best guess of the reservelevel based on prior knowledge. The actuary’s guess maybe based on a simple loss ratio reserving method together with arough conservative guess as to the development pattern (possiblybased on the experience from some other similar business). Thispaper provides reserving actuaries with a tool to assist them withtheir “best guess” of the reserves, especially in the early years ofdevelopment. The method essentially uses an a priori pattern inthe table of expected loss development factors to determine theloss reserves. The pattern of expected loss development factorsis independent of the distribution of the cumulative incurred lossin the accident year and can be varied depending on the actuary’sestimate of the length of the claim settlement period, andthe random split used.When there is a sufficiently large amount of data in the lossdevelopment triangle, the actuary can use the method of thispaper to generate tables of expected loss development factorsto see which ones match the observed loss development factors.The best matched tables can be used to estimate the loss reserves.In closing, there are several important attributes of thismethod:1. It can be used for new and old business.2. It can be used in conjunction with other methods suchas the Bornhuetter-Ferguson method.3. It makes no assumptions about the underlying distributionof the ultimate losses.
A NEW METHOD OF ESTIMATING LOSS RESERVES 4794. The ultimate losses are estimated using only the mostrecent cumulative loss data.5. The method can be used if the length of the settlementperiod varies by year of origin.6. The factors LDF (1)j,N ,LDF(2) j,NLDF (1)j+1,Nand LDF(2)j,N =LDF(2)actual loss development pattern.and their ratios LDF(1)j+1,Nj,N =do not depend on the7. Tables of factors and ratios can be created and saved foreach combination of development year j and settlementperiod N, and for various types of random splits such asthe uniform and beta distributions. The appropriate tablecan be chosen to:a. Match the observed pattern of loss development factorsor tob. Match the actuary’s or underwriter’s best guess ofwhat the pattern of loss development factors shouldbe.
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VOLUME XCII NUMBERS 176 and 177PROC
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FOREWORDActuarial science originate
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2005 PROCEEDINGSCONTENTS OF VOLUME
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2005 PROCEEDINGSCONTENTS OF VOLUME
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Editorial Committee, Proceedings Ed
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2 AN EXAMINATION OF THE INFLUENCE O
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10 AN EXAMINATION OF THE INFLUENCE
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AN EXAMINATION OF THE INFLUENCE OF
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RISKINESS LEVERAGE MODELSRODNEY KRE
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RISKINESS LEVERAGE MODELS 33There a
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RISKINESS LEVERAGE MODELS 35where f
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RISKINESS LEVERAGE MODELS 37where a
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RISKINESS LEVERAGE MODELS 39Various
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RISKINESS LEVERAGE MODELS 49The las
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RISKINESS LEVERAGE MODELS 51ple. Th
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RISKINESS LEVERAGE MODELS 55We also
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RISKINESS LEVERAGE MODELS 59APPENDI
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DISCUSSION OF A PAPER PRESENTED AT
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RISKINESS LEVERAGE MODELS 63known t
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RISKINESS LEVERAGE MODELS 65to be a
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RISKINESS LEVERAGE MODELS 67implies
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RISKINESS LEVERAGE MODELS 71a maxim
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RISKINESS LEVERAGE MODELS 734. INTE
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RISKINESS LEVERAGE MODELS 79REFEREN
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RISKINESS LEVERAGE MODELS 81EXHIBIT
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RISKINESS LEVERAGE MODELS 83
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WHY LARGER RISKS HAVE SMALLER INSUR
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ADDRESS TO NEW MEMBERS 151ateship a
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ADDRESS TO NEW MEMBERS 153You shoul
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ADDRESS TO NEW MEMBERS 155strength
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MINUTES OF THE 2005 CAS SPRING MEET
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MINUTES OF THE 2005 SPRING MEETING
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Volume XCII, Part 2 No. 177PROCEEDI
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MODELING FINANCIAL SCENARIOS 179Bab
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MODELING FINANCIAL SCENARIOS 209TAB
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MODELING FINANCIAL SCENARIOS 237[30
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WHEN CAN ACCIDENT YEARS BE REGARDED
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THE APPLICATION OF FUNDAMENTAL VALU
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ESTIMATING THE WORKERS COMPENSATION
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INCORPORATION OF FIXED EXPENSESGEOF
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DISCUSSION OF PAPER PUBLISHED INVOL
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APPLICATION OF THE OPTION MARKET PA
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THE “MODIFIED BORNHUETTER-FERGUSO
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ADDRESS TO NEW MEMBERS-NOVEMBER 14,
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ADDRESS TO NEW MEMBERS 743Now to an
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PRESIDENTIAL ADDRESS-NOVEMBER 14, 2
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PRESIDENTIAL ADDRESS 747use of thes
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PRESIDENTIAL ADDRESS 753me keep my
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MINUTES OF THE 2005 CAS ANNUAL MEET
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REPORT OF THE VICE PRESIDENT-ADMINI
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2005 EXAMINATIONS—SUCCESSFUL CAND
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OBITUARIESROBERT GRANT ESPIECLYDE H
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OBITUARIES 825SIDNEY M. HAMMER1931
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OBITUARIES 827J. GARY LaROSE1947—
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OBITUARIES 829PAUL J. SCHEEL SR.193
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OBITUARIES 831LEO M. STANKUSCirca 1
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INDEX TO VOLUME XCIIPage2005 EXAMIN
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835GRAVES, CLYDE H.INDEX—CONTINUE
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837INDEX—CONTINUEDREPORT OF THE V
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PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

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