Estimating ULAE Liabilities; Rediscovering and Expanding Kittel's Approach

Existing actuarial literature provides guidance on the use of dollar and count-based methods for the estimation of ULAE liabilities. Traditional dollar-based methods are based on widely available, and usually audited, company financial data, while count-based methods rely on relatively detailed information regarding the number and cost of various claim-handling activities and events. In the case of fast reporting, slow paying lines of business, traditional dollar-based methods may not produce the best estimate of ULAE liabilities, since the familiar "50/50" assumption does not apply. On the other hand, the application of count-based methods is sometimes impractical. For example, the detailed claim count and activity cost data used in the structural methods can be quite difficult to compile and verify - especially to "outside" actuaries. This article describes a generalization to a familiar ULAE liability estimation approach, which attempts to duplicate some of the benefits of the structural methods, whiles relying exclusively on aggregate loss data.