Introduction To Ratemaking And Loss Reserving For Property And Casualty Insurance Review

Introduction to Ratemaking and Loss Reserving for Property and Casualty Insurance

Part III: Loss Reserving

Loss Reserving (or Loss Development) is the process of estimating the liability for unpaid claims on the balance sheet. This is crucial for solvency. Introduction to Ratemaking and Loss Reserving for Property

If the premium is set too low (Ratemaking error) or the liabilities are underestimated (Reserving error), the insurer risks insolvency. Claim inflation: medical cost inflation

Conclusion

Trend and Trend Testing

• Claim inflation: medical cost inflation, judicial awards, social inflation.
• Exposure trend: changes in exposure base or mix.
• Use time series analysis and regression to estimate trending and project future loss costs to the prospective period.