Reserve

Paid Claims Triangle

Reported Claim Triangle

• Reported = Paid Claim + Case outstanding = Paid Loss + Paid ALAE + Reserve Loss + Reserve ALAE

• If both paid claim and reported claim triangle shows the similar anomaly (such as both low at 12 and 24 development), it suggests that paid claim drove the lower reported claims. An investigation into a claim settlement slow-down (which would drive lower paid claims) is warranted

• if both paid claim and reported claim triangles show higher claims at 24 months of development and beyond. It’s not due to settlement rate since reported claim triangle show the similar pattern. Could be large claim with large case reserves, more claim counts, a strengthening of case reserves.

Ratio of Reported Claims to Earned Premium

• Divide reported claims by earned premium for respective year.

• R

Ratio of Reported Claims to On-Level Earned Premium

• Divide reported claims by on-level earned premium

Ratio of Paid Claims to Reported Claims

• It is useful for testing whether there have been changes in case outstands adequacy (the denominator) or in settlement pattern (the numerator)

• Stable ratio of paid to reported claims does not mean that changes are not occurring. Offsetting changes in settlement practices and case reserve adequacy could could result in no changes to the ratio.

• if settlement rate speed-up, it would increase ratio along latest diagonal.

• if case outstanding adequacy increases, it would decrease ratio.

Ratio of paid claims to On-level Earned Premium

• By taking the ratio of paid claims to on-level earned premium, we are effectively removing the impact of rate changes and exposure growth.

Reported Claim Count Triangle

Closed Claim Count Triangle

Ratio of Closed to Reported Claim Count

Average Reported Claims

Average Paid Claims

Average Case Outstanding