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

698 INCORPORATION OF FIXED EXPENSESAPPENDIX ATRENDING PERIODSExpenses should be trended from the average date they wereincurred in the historical period to the average date they willbe incurred in the projected period. Actuaries generally makethe simplifying assumption that expenses are either incurred atthe inception of the policy or are incurred evenly throughout thepolicy period. When using calendar year historical expense data,the trend periods should be different for the two different typesof expenses.First, expenses that are incurred at the inception of the policyshould be trended from the average written date in the historicalperiod to the average written date in the projection period. Thefollowing figure shows the resulting trend period assuming annualpolicies, a steady book of business, and that the projectedrates will be in effect for one year:Second, expenses that are incurred evenly throughout the policyperiod should be trended from the average earned date inthe historical period to the average earned date in the projectionperiod. The following figure shows the resulting trend period assumingannual policies, a steady book of business, and that the