AS463_Lec03 - 1 ACTSC 463/863 Property and Casualty Loss...

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Unformatted text preview: 1 ACTSC 463/863 Property and Casualty Loss Reserving 2 Frequency-Severity Techniques 3 Frequency-Severity > Three basic approaches Simple development of counts and severities Simple development with exposure and inflation Disposal Rate Technique 4 Frequency-Severity Approach 1 > Involves multiple runs of the development technique (closed, reported, incurred severity, etc.) > Good practice to develop both closed and reported counts and both incurred and paid severity > Need to understand the differences 5 Frequency-Severity Approach 1 > Assumptions Appropriate grouping of data (you have to know the data!) Counts and severities will continue to develop in a similar pattern to the recent past > Steps Project ultimate claim counts Project ultimate severity Multiply 6 Example Counts CDF to Ultimate Projected Accident Year Closed Reported Closed Reported Closed Reported Selected Ultimate 2000 1,451 1,466 1.0100 1.0000 1,466 1,466 1,466 2001 1,376 1,414 1.0170 1.0000 1,399 1,414 1,414 2002 1,303 1,360 1.0362 1.0017 1,350 1,362 1,362 2003 1,185 1,274 1.0654 1.0029 1,262 1,278 1,278 2004 1,116 1,258 1.1250 1.0070 1,256 1,267 1,267 2005 1,009 1,273 1.2250 1.0087 1,236 1,284 1,284 2006 1,093 1,533 1.3899 1.0172 1,519 1,559 1,559 2007 675 1,393 1.6439 1.0333 1,110 1,439 1,439 2008 424 1,223 2.0521 1.1542 870 1,412 1,412 2009 179 1,301 5.0989 1.1607 913 1,510 1,510 Total 9,811 13,495 12,381 13,991 13,991 Why is closed so different from reported? 7 Example Closed to Reported Ratios Accident Year 12 24 36 48 60 72 84 96 108 120 2000 23.59% 62.94% 72.07% 82.70% 88.84% 93.01% 94.80% 96.93% 98.23% 98.98% 2001 21.61% 60.61% 69.01% 79.60% 86.11% 90.49% 92.56% 95.32% 97.31% 2002 20.98% 60.39% 67.63% 78.51% 84.50% 88.04% 93.16% 95.81% 2003 30.73% 56.30% 64.56% 71.44% 78.30% 86.58% 93.01% 2004 21.02% 59.71% 62.96% 70.00% 79.62% 88.71% 2005 21.20% 53.58% 57.88% 69.41% 79.26% 2006 27.09% 54.36% 60.33% 71.30% 2007 19.78% 41.74% 48.46% 2008 10.73% 34.67% 2009 13.76% What might this tell us? 8 Incurred Severity (Incurred loss/Reported Claim Counts) Accident Year 12 24 36 48 60 72 84 96 108 120 2000 10,488 20,113 28,196 33,416 37,799 38,938 40,216 40,522 39,061 39,343 2001 14,928 30,636 43,790 48,629 51,887 54,267 53,424 53,008 53,572 2002 17,175 30,040 41,972 47,802 52,482 55,296 55,813 56,716 2003 15,218 30,346 42,103 52,106 54,214 53,536 54,074 2004 16,055 30,671 44,899 50,571 53,663 54,369 2005 19,588 48,582 54,715 64,056 68,415 2006 25,977 37,063 51,860 61,416 2007 26,159 49,534 62,053 2008 32,404 55,385 2009 23,238 Accident Year 12-24 24-36 36-48 48-60 60-72 72-84 84-96 96-108 108-120 2000 1.9178 1.4019 1.1851 1.1311 1.0301 1.0328 1.0076 0.9640 1.0072 2001 2.0522 1.4294 1.1105 1.0670 1.0459 0.9845 0.9922 1.0106 2002 1.7491 1.3972 1.1389 1.0979 1.0536 1.0094 1.0162 2003 1.9941 1.3874 1.2376 1.0405 0.9875 1.0100 2004 1.9104 1.4639 1.1263 1.0611 1.0131 2005 2.4802 1.1262 1.1707 1.0680 2006 1.4267 1.3993 1.1843 2007 1.8936 1.2527 2008 1.7092 1....
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AS463_Lec03 - 1 ACTSC 463/863 Property and Casualty Loss...

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