Reserving in a Changing Environment: Responding to the Impact of Layoffs, Plant Closures and Downsizing in Reserving for Workers Compensation Liabilities

In some instances, the impacts of layoffs and plant closures on workers compensation costs have resulted in a doubling of the pure premiums whereas, in other instances there were no appreciable effects on workers compensation pure premiums. This paper discusses some of the issues surrounding estimating workers compensation losses during periods of layoffs and plant closures. We have also developed a simplistic and practical approach for incorporating the estimated impacts into traditional reserving methodologies.