Escaping Hindsight: Case Reserve Development Using the Reserve Runoff Ratio

The common calculation used in developing case reserves are based on “hindsight” from a separate development test, thus they are based on data that already reflects judgment. A method is presented for estimating development factors for case reserves that strictly uses data within the standard loss development triangles, primarily the paid loss to case reserve disposed or “runoff” ratios. This method is thus, a truly independent view of the case development factors.

Keywords: case reserve development, hindsight