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Foundations of Casualty Actuarial Science

The analyst needs to understand how expenses are
allocated to the line of business and any changes that
have occurred in the allocation procedure before
meaningful numerical analysis of ULAE can be done.

Once unallocated loss expense payments have been
assigned to lines of business, we can begin to estimate
the reserve. The most common procedure is to estimate
the amount of unallocated loss adjustment expense that
is needed per $100 of claims payments.

Q10. Discuss the need for evaluation of ultimate
loss estimate.

Ans. The application of any particular reserve method to a
given body of data yields a set of estimated ultimate
losses. However, each method applied results in a
different set of ultimate losses and an associated reserve
estimate.

The actuary then has to decide on either a best estimate
reserve, or a range of possible reserve estimates, or
both. Of course, for financial statement purposes, a point

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