Loss Development and Annual Aggregate Deductible

The use of an Annual Aggregate deductible by a reinsurer can cause inconsistencies in loss development and incorrect IBNR reserves. This paper describes how AAD business can be added to non AAD business with the combined used to select loss development factors and estimate IBNR reserves when using a chain ladder or Bornhuetter/Ferguson method. The inclusion of similar AAD and non AAD business in loss development triangles increases the credibility of the loss development factors. Other keywords: reserving.