The cycle survival kit. An investigation into the reserving cycle and other issues

Document description

In this paper we investigate and confirm the existence of a reserving cycle in the UK. We ask what causes it and demonstrate that standard actuarial techniques may contribute to it. In particular, we show that the underwriting cycle may distort development patterns and that premium rate indices may understate its magnitude. In order to address the reserving cycle an understanding of the underwriting cycle is essential. This paper raises a number of questions and challenges regarding current reserving practice. Further work may be required by the profession to address these questions.