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Loss reserving is the calculation of the required reserves for a tranche of insurance business, [1] including outstanding claims reserves. Typically, the claims reserves represent the money which should be held by the insurer so as to be able to meet all future claims arising from policies currently in force and policies written in the past.
For example, when a claim is first reported, a $100 payment might be made, and a $900 case reserve might be established, for a total initial reported amount of $1000. However, the claim may later settle for a larger amount, resulting in $2000 of payments from the insurer to the claimant before the claim is closed.
For insurance, the loss ratio is the ratio of total losses incurred (paid and reserved) in claims plus adjustment expenses divided by the total premiums earned. [1] For example, if an insurance company pays $60 in claims for every $100 in collected premiums, then its loss ratio is 60% with a profit ratio/gross margin of 40% or $40.
The loss random variable is the starting point in the determination of any type of actuarial reserve calculation. Define K ( x ) {\displaystyle K(x)} to be the future state lifetime random variable of a person aged x.
Reserves for a mortgage refer to cash or any other assets you can easily access to pay your loan. If your mortgage lender requires them, these reserves would be in addition to the cash you’d use ...
The chain-ladder or development [1] method is a prominent [2] [3] actuarial loss reserving technique. The chain-ladder method is used in both the property and casualty [1] [4] and health insurance [5] fields. Its intent is to estimate incurred but not reported claims and project ultimate loss amounts. [5]
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