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Loss Reserving
Loss reserving refers to the calculation of the required reserves for a tranche of general insurance business.Schmidt, K. D., Zocher, M.The Bornhuetter–Ferguson Principle Variance 2:1, 2008, pp. 85-110. It includes outstanding claims reserves. Typically, the claims reserves represent the money which should be held by the insurer so as to be able to meet all future claims arising from policies currently in force and policies written in the past. Methods of calculating reserves in general insurance are different from those used in life insurance, pensions and health insurance since general insurance contracts are typically of a much shorter duration. Most general insurance contracts are written for a period of one year, and typically there is only one payment of premium at the start of the contract in exchange for coverage over the year. Reserves are calculated differently from contracts of a longer duration with multiple premium payments since there are no future premiums to c ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Tranche
In structured finance, a tranche is one of a number of related securities offered as part of the same transaction. In the financial sense of the word, each bond is a different slice of the deal's risk. Transaction documentation (see indenture) usually defines the tranches as different "classes" of notes, each identified by letter (e.g., the Class A, Class B, Class C securities) with different bond credit ratings. The term ''tranche'' is used in fields of finance other than structured finance (such as in straight lending, where ''multi-tranche loans'' are commonplace), but the term's use in structured finance may be singled out as particularly important. Use of "tranche" as a verb is limited almost exclusively to this field. The word ''tranche'' means ''a division or portion of a pool or whole'' and is derived from the French for 'slice', 'section', 'series', or 'portion', and is also a cognate of the English 'trench' ('ditch'). How tranching works All the tranches together ma ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Loss Development Factor
Loss development factors or LDFs are used in insurance pricing and reserving to adjust claims to their projected ultimate level. Insurance claims, especially in long-tailed lines such as liability insurance, are often not paid out immediately. Claims adjusters set initial case reserves for claims; however, it is often impossible to predict immediately what the final amount of an insurance claim will be, due to uncertainty around defense costs, settlement amounts, and trial outcomes (in addition to several other factors). Loss development factors are used by actuaries, underwriters, and other insurance professionals to "develop" claim amounts to their estimated final value. Ultimate loss amounts are necessary for determining an insurance company's carried reserves. They are also useful for determining adequate insurance premiums, when loss experience is used as a rating factor Loss development factors are used in all triangular methods of loss reserving, such as the chain-ladder metho ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Chain-ladder Method
The chain-ladder or developmenthttps://www.casact.org/library/studynotes/Friedland_estimating.pdf method is a prominent actuarial loss reserving technique. The chain-ladder method is used in both the property and casualtyhttps://www.casact.org/library/studynotes/Werner_Modlin_Ratemaking.pdf and health insurance fields. Its intent is to estimate incurred but not reported claims and project ultimate loss amounts. The primary underlying assumption of the chain-ladder method is that historical loss development patterns are indicative of future loss development patterns. Methodology According to Jacqueline Friedland's "Estimating Unpaid Claims Using Basic Techniques," there are seven steps to apply the chain-ladder technique: # Compile claims data in a development triangle # Calculate age-to-age factors # Calculate averages of the age-to-age factors # Select claim development factors # Select tail factor # Calculate cumulative claim development factors # Project ultimate claims ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Incurred But Not Reported
In insurance, incurred but not reported (IBNR) claims is the amount owed by an insurer to all valid claimants who have had a covered loss but have not yet reported it. Since the insurer knows neither how many of these losses have occurred, nor the severity of each loss, IBNR is necessarily an estimate. The sum of IBNR losses plus reported losses yields an estimate of the total eventual liabilities the insurer will cover, known as ultimate losses. IBNR and IBNER The term "IBNR" is sometimes ambiguous, as it is not always clear whether it includes development on reported claims. ''Pure IBNR'' refers to only unreported claims, not any development on reported claims. ''Incurred but not enough reported (IBNER)'', in contrast, refers to development on reported claims. For example, when a claim is first reported, a $100 payment might be made, and a $900 case reserve might be established, for a total initial reported amount of $1000. However, the claim may later settle for a larger amou ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Average Cost Per Claim
In ordinary language, an average is a single number taken as representative of a list of numbers, usually the sum of the numbers divided by how many numbers are in the list (the arithmetic mean). For example, the average of the numbers 2, 3, 4, 7, and 9 (summing to 25) is 5. Depending on the context, an average might be another statistic such as the median, or mode. For example, the average personal income is often given as the median—the number below which are 50% of personal incomes and above which are 50% of personal incomes—because the mean would be higher by including personal incomes from a few billionaires. For this reason, it is recommended to avoid using the word "average" when discussing measures of central tendency. General properties If all numbers in a list are the same number, then their average is also equal to this number. This property is shared by each of the many types of average. Another universal property is monotonicity: if two lists of numbers ''A'' and ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Random Variables
A random variable (also called random quantity, aleatory variable, or stochastic variable) is a mathematical formalization of a quantity or object which depends on random events. It is a mapping or a function from possible outcomes (e.g., the possible upper sides of a flipped coin such as heads H and tails T) in a sample space (e.g., the set \) to a measurable space, often the real numbers (e.g., \ in which 1 corresponding to H and -1 corresponding to T). Informally, randomness typically represents some fundamental element of chance, such as in the roll of a dice; it may also represent uncertainty, such as measurement error. However, the interpretation of probability is philosophically complicated, and even in specific cases is not always straightforward. The purely mathematical analysis of random variables is independent of such interpretational difficulties, and can be based upon a rigorous axiomatic setup. In the formal mathematical language of measure theory, a random vari ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Statements
Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand. They typically include four basic financial statements accompanied by a management discussion and analysis: # A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time. # An income statement—or profit and loss report (P&L report), or statement of comprehensive income, or statement of revenue & expense—reports on a company's income, expenses, and profits over a stated period. A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the stated period. # A statement of changes in equity or statement of equity, or statement of retained earnings, reports on t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Provision (accounting)
In financial accounting under International Financial Reporting Standards (IFRS), a provision is an account that records a present liability of an entity. The recording of the liability in the entity's balance sheet is matched to an appropriate expense account on the entity's income statement. In U.S. Generally Accepted Accounting Principles (U.S. GAAP), a provision is an expense. Thus, "Provision for Income Taxes" is an expense in U.S. GAAP but a liability in IFRS. Under International Financial Reporting Standards In the International Financial Reporting Standards (IFRS), the treatment of provisions (as well as contingent assets and liabilities) is found in IAS 37. Definition A provision can be a liability of uncertain timing or amount. A liability, in turn, is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Though it is often thought ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Technical Reserve
Technical may refer to: * Technical (vehicle), an improvised fighting vehicle * Technical analysis, a discipline for forecasting the future direction of prices through the study of past market data * Technical drawing, showing how something is constructed or functions (also known as drafting) * Technical file, set of technical drawings * Technical death metal, a subgenre of death metal that focuses on complex rhythms, riffs, and song structures * Technical foul, an infraction of the rules in basketball usually concerning unsportsmanlike non-contact behavior * Technical rehearsal for a performance, often simply referred to as a technical * Technical support, a range of services providing assistance with technology products * Vocational education, often known as technical education * Legal technicality, an aspect of law See also * Lego Technic, a line of Lego toys * Tech (other) * Technicals (other) * Technics (other) * Technique (other) * Te ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bornhuetter–Ferguson Method
The Bornhuetter–Ferguson method is a loss reserving technique in insurance. Background The Bornhuetter–Ferguson method was introduced in the 1972 paper "The Actuary and IBNR", co-authored by Ron Bornhuetter and Ron Ferguson.The actuary and ibnr casact.org Like other loss reserving techniques, the Bornhuetter–Ferguson method aims to estimate insurance claim amounts. It is primarily used in the property and casualty and [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Insurance
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. An entity which provides insurance is known as an insurer, insurance company, insurance carrier, or underwriter. A person or entity who buys insurance is known as a policyholder, while a person or entity covered under the policy is called an insured. The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms. Furthermore, it usually involves something in which the insured has an insurable interest established by ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Chain-ladder Method
The chain-ladder or developmenthttps://www.casact.org/library/studynotes/Friedland_estimating.pdf method is a prominent actuarial loss reserving technique. The chain-ladder method is used in both the property and casualtyhttps://www.casact.org/library/studynotes/Werner_Modlin_Ratemaking.pdf and health insurance fields. Its intent is to estimate incurred but not reported claims and project ultimate loss amounts. The primary underlying assumption of the chain-ladder method is that historical loss development patterns are indicative of future loss development patterns. Methodology According to Jacqueline Friedland's "Estimating Unpaid Claims Using Basic Techniques," there are seven steps to apply the chain-ladder technique: # Compile claims data in a development triangle # Calculate age-to-age factors # Calculate averages of the age-to-age factors # Select claim development factors # Select tail factor # Calculate cumulative claim development factors # Project ultimate claims ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
