Ratemaking and loss reserving are critical to the success of a P&C insurer. Inadequate ratemaking can lead to:
| Function | Core Question | Time Focus | Key Stakeholder | | :--- | :--- | :--- | :--- | | | "What premium should we charge today for a policy that starts now?" | Prospective (Future) | Underwriting, Sales, Product Mgmt | | Loss Reserving | "How much money must we hold today for claims already happened?" | Retrospective (Past) | Finance, Claims, Actuarial, Regulators | Ratemaking and loss reserving are critical to the
P&C insurance is heavily regulated at the state level (in the US) or by national authorities (e.g., PRA in the UK, EIOPA in Europe). It is more stable than CL for immature
The BF method blends an a priori expected loss ratio with the observed development. It is more stable than CL for immature accident years or volatile lines (e.g., catastrophe-prone property). Formula: [ \textUltimate Loss = \textExpected Loss \times (1 - \textExpected % Reported) + \textPaid Loss ] PRA in the UK
Ratemaking and loss reserving are critical to the success of a P&C insurer. Inadequate ratemaking can lead to:
| Function | Core Question | Time Focus | Key Stakeholder | | :--- | :--- | :--- | :--- | | | "What premium should we charge today for a policy that starts now?" | Prospective (Future) | Underwriting, Sales, Product Mgmt | | Loss Reserving | "How much money must we hold today for claims already happened?" | Retrospective (Past) | Finance, Claims, Actuarial, Regulators |
P&C insurance is heavily regulated at the state level (in the US) or by national authorities (e.g., PRA in the UK, EIOPA in Europe).
The BF method blends an a priori expected loss ratio with the observed development. It is more stable than CL for immature accident years or volatile lines (e.g., catastrophe-prone property). Formula: [ \textUltimate Loss = \textExpected Loss \times (1 - \textExpected % Reported) + \textPaid Loss ]