Claims Reserving Flashcards
(9 cards)
Why is accurate reserving important for insurance companies?
To ensure they have enough money set aside to pay future claims.
What factors make claims reserving uncertain?
Changes in laws, payment patterns, old risks, hidden exposures (like asbestos), court outcomes, reinsurance issues, inflation, and interest rates.
What does IBNR stand for?
Incurred But Not Reported.
What is IBNER?
Incurred But Not Enough Reported, meaning claims estimates might be too low.
Why do insurance companies categorize claims by incident year?
To match premiums with claims from the same time period.
What statistics are collected for claims reserving?
Number of claims, nil claims, paid claims, and outstanding estimates.
Name four methods for estimating the total cost of claims.
Projection of paid claims, projection of incurred claims, loss ratio method, Bornhuetter-Ferguson method.
Who decides how much money to set aside for claims?
The board of the insurance company.
How is the accuracy of claims reserves checked?
By looking at the claims run-off, which compares the estimated reserves to actual claims paid.
