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

Discussion in 'SP7' started by Day, Aug 28, 2019.

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  1. Day

    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!
     
    Day, Aug 28, 2019
    #1
  2. Darren Michaels

    Darren Michaels ActEd Tutor Staff Member

    You would normally use reporting year triangles to reserve for business that is written on a claims made basis.
     
    Darren Michaels, Aug 29, 2019
    #2

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