Incurred Loss Development Method: Step 1

  1. Establish aging ratios based on known incurred losses for each year of coverage. Highlighted ratios in the second table are created from the known losses in the first table which are highlighted in the corresponding color. This process is continued to create the whole table of Time to Time ratios.
  2. Calculate the average ratio for each period.
  3. Use average ratio to project ultimate incurred loss on all written insurance.
Months of Development
Accident Year 12 24 36 48 60 72 84
1984 58,641 74,804 77,323 77,890 80,728 82,280 82,372
1985 63,732 79,512 83,680 85,366 88,152 87,413
1986 51,799 68,175 69,802 69,694 70,041
1987 40,143 67,978 75,144 77,947
1988 55,665 80,296 87,961
1989 43,401 57,547
1990 28,800



Time To Time Ratios
Accident Year 12:24 24:36 36:48 48:60 60:72 72:84 84:Ultimate
1984 1.276 1.034 1.007 1.036 1.019 1.001
1985 1.248 1.052 1.020 1.033 0.992
1986 1.317 1.024 0.998 1.005
1987 1.693 1.105 1.037
1988 1.443 1.095
1989 1.326
1990

Go to STEP 2

Copyright © 1996, 1997 Maher Associates, Inc.
Last modified: July 12, 1997