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CAS Working Party on Reserve Variability Areas for Future Research

CAS Working Party on Reserve Variability Areas for Future Research. Areas for Specific Research: Latent Liabilities Correlation of Reserve Segments Making Use of External Information Adjusting Data for Operational Changes Making Use of Individual Claim Data.

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CAS Working Party on Reserve Variability Areas for Future Research

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  1. CAS Working Party on Reserve VariabilityAreas for Future Research Areas for Specific Research: • Latent Liabilities • Correlation of Reserve Segments • Making Use of External Information • Adjusting Data for Operational Changes • Making Use of Individual Claim Data

  2. CAS Working Party on Reserve VariabilityAreas for Future Research 1. Latent Liabilities Various methods exist for estimating future payments for “latent” exposures such as asbestos, pollution, mold, and other mass tort events. The challenge is to turn these into statistical distributions.

  3. CAS Working Party on Reserve VariabilityAreas for Future Research 2. Correlation of Reserve Segments Most statistical reserving models focus on a single triangle or a single reserve segment (e.g. a line of business). We need methods to combine these, so that the variability of the total company reserve position can be calculated.

  4. CAS Working Party on Reserve VariabilityAreas for Future Research 3. Making Use of External Information Selected reserves may use “industry” development patterns and “a priori” expected loss ratios (e.g., B-F methods). How can the uncertainty in this external information be incorporated in the final reserve variability?

  5. CAS Working Party on Reserve VariabilityAreas for Future Research 4. Adjusting Data for Operations Changes Many statistical models assume that the past loss emergence is predictive of the future, or at least that the future will be different in definable ways (e.g. known differences in case reserve adequacy). How is variability affected when that assumption is false?

  6. CAS Working Party on Reserve VariabilityAreas for Future Research 5. Making Use of Individual Claim Data New technology suggests that reserves can be set based on individual claim data rather than the summarized triangle format. Can we reduce estimation uncertainty with this more detailed information?

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