Balancing Development and Trend in Loss Reserve Analysis

The most common loss reserving procedures emphasize development-based projections, which implies trends examined for reasonableness and considered on an ad-hoc basis. This paper presents relatively simple methods for reflecting development and trend simultaneously, with weights that reasonably reflect the relative accuracy of the two types of projections. The Stanard-Buhlmann or "Cape Cod" method is a special case of these methods, which are denoted "Generalized Cape Cod" methods. The appendices present underlying variance structures under which the weights used in the Generalized Cape Cod methods are optimal.