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ACTUARIES AND RESERVE ADEQUACY. (Insurance Daily abstract)
Susan Forray and Zachary Ballweg. Contingencies Magazine
03/01/2014

 

Page 41. The article notes that the adequacy of property/casualty industry loss reserves fluctuates between periods of adverse and favorable development. The authors attempt to determine to what degree biases in standard actuarial methods create or exacerbate the reserving cycle, concluding that these methods “exhibit a strong cyclical nature – and that this cyclical movement travels in tandem with the reserving cycle.” They note the reserve adequacy cycle is highly correlated with the underwriting cycle, as measured by loss ratio. They also attempt to correlate the reserving cycle with economic data, noting that reserve development is inversely related to the U.S. unemployment rate. (Database Highlight, Doc. No. 2014041109)

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