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

ESTIMATING THE WORKERS COMPENSATION TAIL 597TABLE 2.1Indicated Decay Factors Relative to Anchor Year 37Incremental PaymentsYear of DevelopmentDecay Factor55 .96250 1.88045 1.72440 1.211Anchor Year 37 1.000moving averages. These calculations are shown in AppendixA, Tables A.1 through A.4.2. Anchored decay factors. After calculating incrementalage-to-age decay ratios, we then anchor them to a baseyear. We illustrate this using development year n as ouranchor year. These anchored decay factors are calculatedas the cumulative product from the last column on TableA.4.We call the anchored age-to-age factor d n , whered n = p n =p n =1, d n+1 = p n+1 =p n , d n+2 = p n+2 =p n :::,allrelative to p n .In general,p n+r =p n = p n+1 =p n ¤p n+2 =p n+1 ¤¢¢¢p n+r =p n+r¡1 :The anchored decay factors are cumulative products ofthe age-to-age decay ratios and represent payments madein year n + r relative to payments made in the anchoryear n.Table 2.1 shows the anchored decay factors for paymentsmade in accident years of age 40, 45, 50, and 55relative to payments made in an accident year of age 37(our anchor year).