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

644 ESTIMATING THE WORKERS COMPENSATION TAILAPPENDIX ATHE MUELLER INCREMENTAL TAIL METHODThe Mueller Incremental Tail method calculates tail factorsbased on cumulative paid loss development triangles augmentedby incremental calendar year payments from older accidentyears.The method was described in Section 2 of the paper as consistingof three stages:1. Incremental age-to-age decay ratios.2. Anchored decay factors.3. Tail factors.This Appendix provides more specifics regarding these stages.1. Incremental age-to-age decay ratios. The first step is tocalculate incremental age-to-age decay ratios. With theSAIF data, we can calculate incremental paid at age n +1to incremental paid at age n ratios for n ranging from 29to 65 years, using 20-year weighted averages.Tables A.1 through A.3 display incremental MPDpayments for DYs 29 through 40, 40 through 50, and50 through 60, respectively.Because the underlying data for any individual accidentyear are volatile, the age-to-age factors weresmoothed using centered moving averages. The empiricalage-to-age decay factors and smoothed factors areshowninTableA.4.The empirical factors are calculated directly from theraw data. The centered average is a simple five-year averagebased on the empirical factor averaged with thetwo factors above and the two below. When it was not