Chapter 14 Glossary Flashcards
Atafs - Age to age factors
Used by the CAS to refer to link ratios or development factors.
Atufs - Age to ultimate factors
Used by the CAS in triangulation reserving methods to refer to the grossing-up factors to get from an intermediate period of development to ultimate
Average cost per claim method
A method of reserving which relies on the average cost of claims paid or incurred.
Benchmark
A benchmark is any statistic derived from external sources; for example, loss ratio, expense-related measure, claim reporting or claim payment development pattern.
Bornhuetter-Ferguson (BF) method
A reserving method which uses weights based on an a priori loss ratio and claim development.
Case by case estimation
A method of determing the reserve for outstanding reported claims, where each outstanding claim is individually assessed to arrive at an estimate of the total payments to be made. The sum of all case estimates is often referred to as the outstanding claims reserve (OCR) or reported but not settled reserve (RBNS). The shorter term “case estimation” is often used and the estimates are referred to as case estimates.
Chain ladder method
A statistical method of estimating outstanding claims, whereby the weighted average of past claim development is projected into the future. The projection is based on the ratios of cumulative past claims, usually paid or incurred, for successive years of development. It requires the earliest year of origin to be fully run-off or at least that the final outcome for that year can be estimated with confidence. If appropriate, the method can be applied to past claims data that have been explicitly adjusted for past inflation. Further variations on this original theme are now in wide usage.
Development factors
The factors emerging from a chain ladder calculation that are the ratios of claims in successive development periods. Sometimes known as link ratios.
Grossing-up factors
A factor used to adjust an immature or incomplete figure to an ultimate or complete one. For example, a factor to adjust claims paid to date from a specific accident year to the full ultimate claim amount for that accident year.
Incurred but not enough reported reserve (IBNER)
A reserve reflecting expected changes (increases and decreases) in estimates for reported claims only (that is, excluding any “true” or “pure” IBNR claims). The abbreviation is sometimes stated as “incurred but now enough reserved”. The two terms can be regarded as identical in meaning.
Incurred but not reported (IBNR) reserve
A reserve to provide for claims in respect of claim events that have occurred before the accounting date, but still to be reported to the insurer by that date. In the case of a reinsurer, the reserve also needs to provide for claims that, although already known to the cedant, have not yet been reported to the reinsurer as being liable to involve the reinsurer.
In some types of work, especially in reinsurance and in the London Market, IBNR provisions include any IBNER provisions. Sometimes the provision for claims incurred on or before the valuation date and reported after the valuation date is referred to as the True or Pure IBNR, ie excluding the IBNER component for claims that have been reported on or before the valuation date.
Link function
A link function provides the relationship between the linear predictor and the mean of the distribution function in a generalised linear model (GLM).
Ogden tables
These are a set of tables used to help in the calculation of special damages and the present value of loss of earnings or annual expenses in personal injury and fatal accident cases. The tables provide multipliers which take account of life expectancies and a range of discount rates and are prepared by the Government Actuaries Department of the UK. The discount rate is set by the Government of the UK.
Run-off triangle
The development or run-off triangle may be of paid or incurred claims by amount or number (for determining the development of claims), or of premiums (to determine the earning pattern of written premiums)
