Estimating outstanding claims reserves - from the standpoint of an external observer

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In this paper we describe a computerised method of assessing the relative strengths of the outstanding claims reserves of general insurers from the statutory returns. While Wood MacKenzie & Co. Ltd. has developed this system principally as a tool of investment analysis it could also be of interest to insurance brokers, the Regulatory authorities and the insurance companies themselves. The method, which in its latest phase of development includes an explicit allowance for inflation, is described in detail in the appendices with the main body of the paper concentrating on general principles. The means by which historical reserving strength is gauged are touched on and possible sources of distortion are discussed. The success of the method in practical use is illustrated and we end by suggesting improvements to the data available.