Reserving for Extended Reporting Endorsement Coverage, Including the Death, Disability, and Retirement Policy Provision

Writers of physicians professional liability (PPL) claims-made coverage typically offer a death, disability and retirement (DDR) provision within their policy language, stating that, in the event of one of these three described events, an extended reporting endorsement (ERE) will be provided to the insured without additional premium charge. The current methodology for deriving an indicated DDR reserve is timeconsuming, leveraged, and uncertain as a result of its reliance on calendar period projections up to 50 years beyond the evaluation date. This monograph proposes a fundamentally different methodology for developing an indicated DDR reserve that addresses these concerns.

A related methodology for pricing the DDR policy provision will also be presented.

In addition, two methodologies that may be used to develop an indicated loss and loss adjustment expense LAE) reserve associated with issued EREs are presented.

Keywords: Medical Malpractice—Claims-Made; reserving; reserving methods; Statutory Accounting Principles; unearned premium reserves.