Introduction To Ratemaking And Loss Reserving For Property And Casualty Insurance Now

The loss reserving process involves several steps:

Historical Data (Losses) → Adjust for Inflation & Trends → Project Future Losses → Add Expenses & Profit → Final Rate effective January 1

Consider a general liability policy for a manufacturing company, effective January 1, 2023. A worker is exposed to a toxic chemical. The worker develops a disease in 2024, reports the claim in 2025, and a lawsuit settles in 2027. This creates a —the time lag between the policy effective date and the final claim payment. reports the claim in 2025