Movement Analysis

Consistent with the requirements of Actuarial Standards of Practice (ASOPs) 36 and 41 (paragraphs 4.5 and 3.5, respectively), this paper derives simple but mathematically sound formulas for explaining differences in estimates of ultimate from one period to the next. Specifically, the change in ultimate is decomposed into the movement due to loss experience relative to the movement due to changes in assumptions or methods. The approach outlined below is for use in common reserving situations where the Bornhuetter-Ferguson (BF) or Chain-Ladder (CL) methods are used, but can also be easily extended in other circumstances.

Keywords: Reserving; Communication