As I see it, there is no good way to deal with this using published financial
information. I expect the new ALAE will be longer tailed than the old ALAE
and thus the historical development available from schedule P will be
unusable. Since historically ULAE was put into schedule P on a formula basis
(which, incidentally, changed last year) it makes no sense to me to combine
these amounts and do a single LAE projection. This would erroneously assume
there was some correct assignment of past ULAE payments to accident year and
development period.
I've recommended that companies try to keep track of the amounts shifted
between the two categories so that the experience could be restated the old
way until sufficient data are available to do projections using the new
definitions, but I doubt many will be willing or able to do this.
I also expect many companies have elected to do this on a calendar year basis,
thus further complicating everything.
Are there any good suggestions?
Greg Grace
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