Spring 2015 #16
For part a (IRIS 11) why is the one year loss reserve development calculated as the incremental change in incurred? Isn't this ignoring the payments made on those prior year reserves? TIA!
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For part a (IRIS 11) why is the one year loss reserve development calculated as the incremental change in incurred? Isn't this ignoring the payments made on those prior year reserves? TIA!
Comments
incurred1 - incurred0 = paid1 - paid0 + reserve1 - reserve0
= reserve1 - [reserve0 - (paid1 - paid0)]
Calendar year paid reduces the original reserve. The difference of this reduced original reserve and the ending reserve is considered the reserve development.