Calculation of Risk Margin Levels for Loss Reserves

It is well known that actual future losses for most lines of business will, with certainty, not equal their estimated value. In order to provide a measure of the precision of loss reserve estimates, a diversity of procedures for quantifying loss reserve variability is currently is use. Many of these procedures have significant limitations, while other are not well understood and therefore are rarely used. Measures of variability are frequently utilized by actuaries to compute risk margins for adverse deviation. This session will present a debate of two approaches to the determination of risk margins in loss reserves, including aggregate probability models for loss reserves and adjusting discount factors.