Re: Kittlel/Bill

Jason T. Sash ( (no email) )
Wed, 09 Sep 1998 07:21:30 -0500 (Central Daylight Time)

The 1040 is the AY losses for 1981 which equals the amount paid in 1981
(600) plus the amount paid in 1982 (440). Bill assumes that,
disregarding inflation, $1,000 are incurred for AY 1981 for each case.
In case 3, however, inflation affects AY losses paid in the subsequent
year. So the AY 1981 losses paid in 1981 is 600 = (.60)*(1000) and the
AY 1981 losses paid in 1982 is 440 = (1000 - 600)*(1.1) [or
(1000)*(.40)*(1.10)].

The 440 loss reserve for 1981 (case 3) is the AY 1981 losses paid in
1982. (Remember that AY losses are fully paid in the following year so
that you don't have to worry about any past AYs.) The 1982 loss
reserve equals the AY 1982 losses paid in 1983:
484 = ((1000*1.10)-660)*(1.10) [or (1000*1.10)*(.4)*(1.10)]

Hope this helps.

On Wed, 09 Sep 1998 07:36:41 -0400 Jim Shoenfelt
<jimshoenfelt@amdyne.net> wrote:

> Has ayone made sense of Exhibit 1 in this paper?
>
> For example, where does the 1040 in case 3 come from? And given
that, where do the the current ay paids come from in case 3? >
> Why does the case reserve start at 440 instead of 400 in case 3? >
> How is the 1982 year end loss reserve computed in case 3?

----------------------
Jason T. Sash
Jason.T.Sash@EMCIns.com