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The Insurance Times

of statistical and judgmental elements.

65. The loss development method is based upon the
assumption that claims move from unreported to
reported-and-unpaid to paid in a pattern that is
sufficiently consistent that past experience can be used
to predict future development.

66. Where sufficient loss or claim experience to produce
reliable trend indications is not available, the actuary might
supplement or supplant the available experience with
external data.

67. If the premiums collected exceed the expenses and
losses paid, the insurer makes what is called an
underwriting profit; if not, there is an underwriting loss.

68. In addition, the insurer will generally make an investment
profit arising out of the investment of funds between
premium collection and payment of expenses and losses.

69. The growth of the liability lines, increased inflation, and
higher interest rates resulted in investment profits that
dwarfed the underwriting profits. Not only did this
change the way insurance management viewed its
financial results and plans, but also it focused regulatory
attention on the overall rate of return for insurers, rather

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