Claims Reserving Manual, vol.1: Section C: Company and external influences

Document description

If we lived in a world where nature and human activity were well behaved and gave no cause for upset or surprise, then claims reserving would be a simple matter scarcely requiring the services of the expert. One would need to assess the values of at most three quantities for each class of business: a) the exposure to risk, b) the frequency of claim, and c) the average loss per claim. Past and present trends for these factors could be assumed to hold equally in the future, and the known patterns could be projected forward with confidence.

However the real world is full of uncertainties so that projections are seldom straightforward. For protection, the reserver needs to acquire a knowledge of the influences which are most likely to disturb the picture. Only in this way can he or she hope to produce figures in which theory is properly tempered by reality. The present section outlines the main influences, both internal and external to the company, which usually need to be taken into account.

Contents: Classification and general analysis; Business mix and volume; Underwriting, rating and policy conditions; Claims handling and definition; Inflation and economic factors; Legal, political and social factors; Climate and environmental factors