General term for smoothing numerical information using a set of data points to arrive at a single value (measure of central tendency) to represent those data points. Examples include straight averages (a sum of numerical data values divided by the number of data value=arithmetic mean) and weighted averages (putting more or less emphasis on certain data values using a subjective measure of each value's importance). Specific insurance definitions: In non-marine insurance, the term relates to the practice of scaling down the amount of a claim by applying the ratio of the actual sum insured to the
Catastrophes are infrequent events that cause severe loss, injury or property damange to a large population of exposures. While the term is most often associated with natuaral events (e.g. earthquakes, floods or hurricanes), it can also be used when there is concentrated or widespread damage from man-made disasters (e.g. fires, explosion, pollution, terrorism or nuclear fallout).
Reserve set aside for catastrophic event. These pre-event catastrophe reserves are designed to accumulate, over time, a portion of the capital an insurer may require to pay catastrophe claims. The advantage to the insurer is that this capital is put aside on a pre-tax basis and held in a liability account known as a catastrophe reserve. In noncatastrophe years, the catastrophe reserve reduces federal income tax on the apparent "annual profit" arising from catastrophe-related premium when there are no offsetting catastrophe claims to pay. That federal tax reduction is reversed in catastrophe ye
The rate of increase in the cost of claim payments. It is likely to be influenced by many different types of inflationary force, e.g. general or specific earnings inflation, general or specific price inflation, court award inflation.
Claims Reported, also known as Reported Claims and Reported Losses, are the sum of cumulative paid claims and case outstanding estimates at a particular point in time (Source: Casualty Actuarial Society) See Page 15 in the Werner Modlin Ratemaking document. See Pages 20 and 21 in the Friedland Estimating document.
A table that describes changes in the value of various cohorts over time. The rows show accident years, i.e. the time (years, quarters...) in which claim events occurred, and the columns show the development years, i.e. years elapsed since accident year when the claims are paid out. The development of run-off triangles is generally used for estimating incurred but not reported claims for insurance portfolios, in order to set appropriate reserves that are in compliance with regulatory requirements as well as the company's risk appetite. Also known as: Development Triangle or Run-off triangle. S