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Foundations of Casualty Actuarial Science

with payment actually come in close to the forecast
development amount, the analyst can have more
confidence in the analysis and understanding of the
reserve situation.

If results are not as forecast, additional work is required
to determine if the differences were random
occurrences, or if it is an indication that the projections
should be revised.

Q12. Write short notes on -

a) Reserve Discounting - In establishing the liabilities
for losses and loss adjustment expenses, it is often
necessary to recognize the time value of money. Usually
the interest is not taken into account in the loss reserve
estimation procedures.

A payout schedule of the liability amount is required to
discount the loss reserve liability for the time value of
money. If the liability estimate is given by the paid loss
development estimate, we get an undiscounted liability.
The payment pattern then can be deduced from the

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