Because claims often take months or even years to settle—especially in "long-tailed" lines like workers' compensation or liability—insurers must set aside money today for claims that haven't been fully paid yet.
This is the most fundamental reserving method. It assumes that the past pattern of claim development will continue into the future. Because claims often take months or even years
Property and Casualty (P&C) insurance—covering risks from car accidents and house fires to medical malpractice and product liability—operates on a simple promise: the policyholder pays a premium today in exchange for the insurer’s promise to pay for certain losses tomorrow. But how does an insurer determine how much premium to charge? And how does it know how much money to set aside for claims that have happened but not yet been paid? Because claims often take months or even years
Ensuring financial soundness while maintaining equity among policyholders. Essential Ingredients: Loss-Development Factors: Adjusting past losses to their ultimate expected values. Trend Factors: Because claims often take months or even years