Fall 2018 Q17
When calculating IRIS 13 for the problem, we need the Loss & LAE reserves, prior year and One-year loss reserve development.
It made perfect sense to me how we got the first component. Part 2 - Part 3 from Schedule P and sum the 2016 column.
However, to calculate the One-year loss reserve development, we did (260+644) - (240+598) = 66. These are values from Schedule P, Part 2. Wouldn't some of the development that happens in Part 2 be due to increases in paid amounts (and not exclusively RESERVE changes)? Would it be more appropriate to call the second component One-year loss development?
Comments
Part 2 incurred includes IBNR. It is ultimate losses. The change from one point to the next depicts change in reserve.
If the change from one point to the next is zero, that means total reserve (case+IBNR) was taken down exactly by the amount paid during that time. If it is not zero, that means reserves changed by that amount, beyond the negation of paid losses.
"One-year reserve development" is a term that refers to the reserve change beyond the negation of paid losses.