Thanks Darren.
Yes, I am assuming that we have a triangle with underwriting years down the LHS and quarterly development periods (very common), and, yes, I am assuming that business is written evenly throughout the year (extremely common).
Of course, the triangle at 2019 Q2 will only include claims from business written to date, but, without adjustment, you will be applying a factor to those 2019 UWY claims (in our example) that includes the fact that business is written throughout the year. That factor will likely be greater than a factor where all the business is written in the first quarter. Hence it must implicitly include reserves for business yet to be written. (Therefore I disagree with the closing statement of your third paragraph.)
Yes, if the valuation date falls on an exact quarter, then having underwriting quarters down the LHS solves this, but I would then argue the case of a valuation date not falling on an exact quarter and hence implicitly allowing for business yet to be written. The answer then being that you need to re-jig the triangle so the LHS aligns with your valuation date (unlikely to happen in practice).
Basically I don't think it can be claimed that projecting on an underwriting year basis will project reserves for business written to date, only, without further expansion.
Do you agree? I'm not sure if I'm missing something fundamental or if I'm just not understanding correctly, but I would appreciate any further clarification.
Kind regards
Last edited by a moderator: Apr 12, 2021