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Foundations of Casualty Actuarial Science

tracking the history of a group of claims with similar
definitional groupings. The data in this loss format
is arranged in the form of triangle.

Each undeveloped loss year is projected to its
expected ultimate level based on the assumption that
each loss year will be completed in a way that is
analogous to prior years. It should be noted that there
is substantial variation from method to method. The
analyst has to choose a point estimate in some
fashion. The choice is dependent on the supporting
information the analyst develops concerning
company operations as well as further statistical
tests.

(ii) Reserve Development methods - The triangular
methods have used either paid or incurred data
exclusively, but have not made any use of the
historical relationships between paid amounts and
case reserved amounts. The reserve development
method attempts to analyze the adequacy of case
reserves based on the history of payments against
those case reserves.

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