Consider an example, involving only one accident year & hence no need for
trending:
You have 2 losses in a particular accident year.
Loss #1 is initially reserved at $50,000 and finally settles for $52,000.
Loss #2 is iniitally reserved at $ 5,000 and finally settles for $ 10,000
Unlimited loss development: (52+10)/(50+5) = 1.127
Loss development limited to $25,000: (25+10)/(25+5) = 1.167
Loss development limited to $ 10,000: (10+10)/(10+5) = 1.333
The relationship between LDFs for losses at various limits depends on the
size of loss distributions
at the observed age & at ultimate.
Douglas Dee
Visit the CAS Web Site at http://www.casact.org
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