Glossary Flashcards
ALAE
allocated loss adjustment expenses
ACPC
Average Cost per Claim method - a method of reserving which relies on the average cost of claims paid and incurred.
Basic Chain Ladder Model
A statistical method of estimating outstanding claims, whereby the weighted average of past claim development is projected into the future. If appropriate the method can be applied to past claims data that have been explicitly adjusted for past inflation
Berquist-Sherman model
A reserving method whereby the incurred triangle is adjusted for changes in case reserve adequacy and/or the paid triangle is adjusted for changes in claims settlement rates.
BF model
A reserving method that uses weigths based on a priori loss ratio and claims development
Bootstrap model
This reserving method relies on random sampling with replacement and therefore produces a range of outcomes
Cash back bonus
A benefit provided for in a policy document that entitles a policyholder to a predetermined benefit on expiry of a specified period and under specified circumstances
Cape Cod model
A reserving method similar to BF, instead of priori loss ratio it uses weights proportional to a measure of exposure and inversely proportional to claims development
Claims handling expenses
Expenses assosciated with the settling and administration of claims
Closed portfolio
When no new business may be added to a portfolio
Credible data
When data is worthy of confidence due to it’s applicability, validity or volume
Diversification benefit
When combining classes, it is unlikely the worst case will occur for all classes at the same time, hence a benefit is realised
Expected loss ratio model
A reserving method whereby the ultimate claims are derived from the expected loss ratio assumption and earned premium
Inflation adjusted chain ladder method
A reserving method which is based on the basic chain ladder model but incremental payments or case estimates in each calendar period are adjusted by past inflation to current monetary terms
What is materiality criteria?
The methods
procedures
or rules used to assess materiality
Recoveries
The expected amount to be recovered with respect to particular claims.
A distinction can be made between reinsurance recoveries and non-reinsurance recoveries e.g. salvage and subrogation
Reporting date
A point in time at which the insurer reports on it’s financial position
Risk
The uncertainty of future outcomes in relation to that expected. In particular, increased uncertainty is interpreted to imply more risk
Run-Off
When an insurer will write no new business but continue to operate with underwritten insurance contratcs until the end of the existing policies term
Run-Off expenses
All expected expenses likely to be incurred in running the portfolio
Sensitivity analysis
Assessing the change in results when varying the inputs to a model or calculation
Technical provisions
The amount set aside to cover all liabilities arisign out of contracts with past and future expsoure/expired and unexpired risk
Unexpired risks
Risks for which the coverage extends beyond the valuation period
ULAE
Expenses incurred that are not directly attributable to an individual claim, these include claim department costs and usually some overheads
Valuation model
All the methods, procedures and calculations used in the actuarial valuation
Valuation unit
A line of business, group of a lines of business or a part of one line of business which is treated as a single entity for the purposes of a valuation
Wind-up
When an insurer ceasing all business activities and intends on returning it’s license
