Measuring the Impact of Unreported Premiums on a Reinsurer's Financial Results

A reinsurers’ financial results are materially influenced by unreported premiums, and the losses and expenses related to these premiums. When unreported premiums and losses are estimated using underwriting year experience, an approximation is required to separate premiums earned and losses incurred before the reserve date from those earned and incurred after the reserve date. this paper presents a technique for approximating the earned portion of unreported premiums. It also demonstrated that financial results can vary significantly depending on the treatment of the earned an unearned portion of unreported premiums. A series of examples based on hypothetical data are used to show alternative estimates of underwriting income.