Varying Trend Factors by Size of Loss

The paper describes in detail a new method which can be applied by an insurance company to its own data to set reserves for outstanding losses (including IBNR) and to calculate a confidence interval for these reserves. The method has also opened up a whole range of interesting ways of looking at data. Although the method can be applied to any sort of business it is particularly helpful in looking at long tail business, such as that written by reinsurers, for which other methods have proved less satisfactory. The methodology can also be applied by supervisory authority to establish minimum reserving standards for companies where global market data on run-offs for different classes of business is available. A new method of setting minimum reserves for individual syndicates based on the methodology in the paper is currently being tested by Lloyd's of London. This work is briefly described in the final section of the paper. Claim Size Modeling, Loss Distribution, Increased Limits, Excess of Loss