A Note on Using Inflation-Truncated Data

When losses are reported excess of a fixed amount, the effect of inflation on the trended values is to eliminate information from the lower end of the data for the older years. Consequently, the corresponding low end of the recent years is not used in analyses. A simple maximum likelihood solution is proposed which uses all the data. The price paid is that the frequency and severity distribution analyses are then intertwined. Premium Analysis/Profit Factor/Rate of Return/Risk/Reinsurance