Reserving for Excess Layers: A Guide to Practical Reserving Applications

Actuaries analyzing reserves for excess insurance layers are confronted with circumstances distinctly different from those faced in primary layer reserving. Although many excess reserving techniques are similar to primary techniques, the low-frequency /high-severity nature of excess exposures creates some difficulties not typically experienced in primary analyses. However, this same low frequency nature of excess layers allows the application of some reserving methods that would be impractical for many primary coverages. This paper presents a compilation of excess loss reserving methods, describes their application using a common data base, and tests their performance in projecting ultimate loss amounts.