Reserving for Retrospective Returns

This paper discusses possible approaches to the problem of establishing reserves for retrospective returns for the annual statement and for statements of company operating results. The first of the formulas explained has produced satisfactory results when applied to the data of one company for policy years from 1956 to 1962. The reserves established by the methods described in this paper do not lend themselves readily to run-off tests. The reasons these reserves are difficult to test and the method which should be used for testing will be discussed in the paper.