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

ESTIMATING THE WORKERS COMPENSATION TAIL 625TABLE 6.2Indicated Loss Reserve at Different Maturities(dollars in millions)Other Workers MPD Reserve as a PercentageMaturity MPD Compensation of Total Workers(Years) Reserve Reserve Compensation Reserve10 $41.3 $10.4 8015 39.6 9.5 8125 34.6 5.7 8635 27.0 2.5 92and trended mortality methods. This table repeats the MPD tailsindicated by SAIF’s experience in Table 2.4.As noted earlier, the indications of the static mortality modelreasonably fit those from SAIF’s historical loss experience, exceptthat the model somewhat understates development for DYs40—54.The relative contribution of MPD versus all other workerscompensation to the total loss reserves for a given AY is muchgreater if the trended mortality model is assumed. Those percentagesat various maturities are shown in the last column ofTable 6.2.The above table is analogous to Table 2.5, which shows resultsbased on SAIF’s historical loss experience. In deriving theseestimates, total AY ultimate losses of $100 million were assumed,together with a 50—50 split between MPD and other workerscompensation. However, the $50 million figure for ultimate MPDwas changed to the product of cumulative paid MPD at 10 yearsof development and the 10 to ultimate tail factor from the trendedmortality model. That increased ultimate MPD to $61.75 million.Table 6.3 provides a side-by-side comparison of the percentagesof the total workers compensation loss reserve attributableto MPD, as estimated using historical PLDFs and PLDFs indicatedby the trended mortality model.