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How do you reserve for claims-made policies on an accident year basis?

D

Day

Member
Say you have a D&O claims-made policy covering claims reported in 2019. Subsequently, a claim is made for a loss that occurred in 2014.

Assume you are an actuary of a company that projects its reserves on an earned basis. Based on the information above, the loss should appear in the AY 2014 row in your claims run-off triangle. However, this would be inconsistent with the earned premium which would fall in AY 2019, so you could be over-estimating accident year loss ratios on the back years.

Can I please ask if I am misunderstanding something here as the above doesn't make complete sense to me?

Thank you in advance!
 
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