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appropriate balance between the two. Issues of
credibility and homogeneity for loss reserving should be
thought in terms of their impact on loss development
pattern. Credibility and homogeneity of data from even
the same line of business gets greatly enhanced if the
policy limits or layers of losses are similar.

E .g loss development data on General Liability excess
reinsurance may not be useful if not grouped by
underlying limits and layer widths. Aggregate limits of
liability or even large losses that are capped at policy
limits are very important for the loss reserve analyst.

Q8. Briefly discuss the loss reserve estimation
methods.

Ans. There are several methods for the projection of reserves
to ultimate values. The most common method project
the growth behavior of the reserve inventory. These
methods can be used to project ultimate values of any
growth process.
(i) Triangular methods - The most common methods
used to estimate ultimate loss levels consist of

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