AS463_Lec06 - ACTSC 463/863 Property and Casualty Loss...

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1 ACTSC 463/863 Property and Casualty Loss Reserving
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2 ALAE & ULAE
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3 ALAE > Allocated Loss Adjustment Expense • Expense that can be directly associated with a particular claim – Legal – Expert witness – Police reports – External adjuster fees • Availability of data can be an issue – Often included with losses and not case reserved separately • Development can differ from underlying losses
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4 Estimating ALAE > Can use the same methods as regular losses > ALAE reserving depends on data available • Included with losses • Tracking of paid losses only • Full case reserving and paid tracking > Most common approaches are regular paid and incurred development and development of paid to paid ratios
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5 Estimating ALAE > Paid to Paid Ratios • Take ratio of paid ALAE to paid losses excluding ALAE – Can develop in normal fashion or use an additive approach
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6 Example - Development Accident Year Paid ALAE LDF to Ultimate Ultimate Paid ALAE 2005 764 1.000 764 2006 861 1.000 861 2007 710 1.012 719 2008 770 1.115 859 2009 630 1.520 958 Total 3,735 4,160 Paid ALAE Accident Year 12 24 36 48 2005 690 753 764 2006 500 760 853 861 2007 550 650 710 2008 555 770 2009 630 Paid ALAE LDFs Accident Year 12-24 24-36 36-48 48-Ult 2005 1.091 1.015 2006 1.520 1.122 1.009 2007 1.182 1.092 2008 1.387 Selected 1.363 1.102 1.012 1.000 Cumulative 1.520 1.115 1.012 1.000
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7 Example – Ratio Development Paid Losses Accident Year 12 24 36 48 Selected Ultimate 2005 9,200 9,300 9,300 9,300 2006 8,000 8,900 9,060 9,060 9,060 2007 9,200 9,900 9,980 10,000 2008 8,300 9,400 9,550 2009 9,500 10,750 Paid ALAE Accident Year 12 24 36 48 2005 690 753 764 2006 500 760 853 861 2007 550 650 710 2008 555 770 2009 630 Paid to Paid Ratios Accident Year 12 24 36 48 2005 7.5% 8.1% 8.2% 2006 6.3% 8.5% 9.4% 9.5% 2007 6.0% 6.6% 7.1% 2008 6.7% 8.2% 2009 6.6%
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8 Example – Ratio Development Accident Year Paid to Paid Ratio LDF to Ultimate Ultimate Ratio Ultimate Paid Losses Ultimate Paid ALAE 2005 8.2% 1.000 8.2% 9,300 764 2006 9.5% 1.000 9.5% 9,060 861 2007 7.1% 1.012 7.2% 10,000 720 2008 8.2% 1.102 9.0% 9,550 862 2009 6.6% 1.355 9.0% 10,750 966 Total 48,660 4,173 Paid to Paid Ratios Accident Year 12 24 36 48 2005 7.5% 8.1% 8.2% 2006 6.3% 8.5% 9.4% 9.5% 2007 6.0% 6.6% 7.1% 2008 6.7% 8.2% 2009 6.6% Paid to Paid LDFs Accident Year 12-24 24-36 36-48 48-Ult 2005 1.080 1.015 2006 1.366 1.103 1.009 2007 1.098 1.084 2008 1.225 Selected 1.230 1.089 1.012 1.000 Cumulative 1.355 1.102 1.012 1.000
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9 Example – Additive Development Accident Year Paid to Paid Ratio Ratio Increment Ultimate Ratio Ultimate Paid Losses Ultimate Paid ALAE 2005 8.2% 0.000 8.2% 9,300 764 2006 9.5% 0.000 9.5% 9,060 861 2007 7.1% 0.001 7.2% 10,000 722 2008 8.2% 0.008 9.0% 9,550 856 2009 6.6% 0.022 8.9% 10,750 953 Total 48,660 4,157 Paid to Paid Ratios Accident Year 12 24 36 48 2005 7.5% 8.1% 8.2% 2006 6.3% 8.5% 9.4% 9.5% 2007 6.0% 6.6% 7.1% 2008 6.7% 8.2% 2009 6.6% Paid to Paid Increments
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AS463_Lec06 - ACTSC 463/863 Property and Casualty Loss...

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