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methods may be inappropriate. The development
methods may produce unreliable results for a new line
of business, with little historical information or a volatile
line of business that is subject to very large occasional
losses, such as contract bond surety.

Also fitting in this category are cases where losses are
reported over a long period of time, and have very little
loss reported in the first two to three years such as excess
insurance and reinsurance. In this type of situations a
method offering a blend of stability and responsiveness
is more appropriate. The BF method estimates ultimate
loss by adding together actual reported loss with expected
future incurred development. Expected future incurred
development relies on expected losses and selected loss
development factors.

One advantage of the BF method is that it avoids
overreacting to unexpected losses.

f) Loss Adjustment Expenses (LAE) - An extremely
important part of the loss reserve evaluation process is

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