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

600 ESTIMATING THE WORKERS COMPENSATION TAILTABLE 2.337 to Ultimate MPD Tail Factors Based on DifferentAnchor YearsAnchor Year37 to Ultimate MPD Tail Factor37 1.96436 1.80835 1.49634 1.43933 1.369Selected 1.581 ¤¤ Average excluding the high and low.The empirically calculated 37 to ultimate MPD tail factorsrange from a low of 1.369 to a high of 1.964. The value issensitive to relatively small changes either in incremental ageto-agefactors in the tail or in the cumulative age-to-age factorsat the end of the cumulative triangle.Another approach for reducing the high level of volatility ofthe tail factors shown in Table 2.3 is presented in Table A.6 ofAppendix A. Each of the average PLDFs for ages 30 through 36is adjusted to what it would be for age 37 using the appropriateproducts of incremental decay factors from AYs 1965 and prior.A weighted average of all of these adjusted PLDFs (1.022) isthen used to replace the actual PLDF for DY 37 (1.033). The finalselected tail factor from age 37 to ultimate is then 1.0 plus theproduct of the cumulative decay factor of 30.071 and .022/1.022(1.647).2.2. SAIF’s Indicated Paid Tail FactorsWhen the indications from SAIF’s incremental paid estimationof the tail from 37 years to ultimate are combined with thoseof a standard paid loss development approach up to 37 years ofmaturity, the MPD tails shown in the left column of Table 2.4at different maturities were derived. Some readers may be interestedin the Total Workers Compensation tail factor (medical and