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

ESTIMATING THE WORKERS COMPENSATION TAIL 603TABLE 2.7WCIRB Indicated Loss Reserve by Loss Type atDifferent Maturities(dollars in millions)Medical Indemnity Medical ReserveMaturity Loss Loss as a Percentage(Years) Reserve Reserve of Total Reserve10 $11.7 $2.7 81%15 9.6 1.8 84%25 6.8 1.1 86%than the indemnity tails. Table 2.7 provides a comparison of thesize of the medical and indemnity loss reserves at different maturities,again assuming an AY with $100 million of ultimatelosses.In California, medical loss reserves make up an increasingpercentage of the total workers compensation loss reserve at latermaturities.3. INCORPORATING THE STATIC MORTALITY MODEL INTO THEINCREMENTAL PAID TO PRIOR OPEN CLAIM METHODThis section presents the incremental paid to prior open claimmethod of reserve estimation. The basics of this method bearmuch resemblance to the structural methods developed by Fisherand Lange [3] and Adler and Kline [1]. In essence, incrementalpayments for every development year are estimated by takingthe product of the number of open claims at the end of the priordevelopment year and an estimated claim severity.While this method is of limited value for less mature DYs, itsmerit relative to other reserving methods is substantial in estimatingreserves for future MPD payments for more mature DYs. Forsuch mature DYs, future incremental payments are essentially afunction of how many claims are still open and the average size