How to get Claims Reserve Development by Accident Year

[vinod1]

I really like the way Fairfax presents the Claims Reserve Development by Accident Year. It provides a simple way to look at how conservatively reserves are being established by specific year. Just going by Calendar year it is difficult to separate out how adequately reserves are established in any given year.

 

However, I did not see this information in the annual reports of BRK, MKL, WRB. All of them just give the claims reserve development by calendar year. Does anyone have an idea of how to get this information? Is this filed with NAIC?

 

Thanks

 

Vinod

[Rabbitisrich]

I might have misunderstood your question but Berkshire lists their IBNR and unpaid losses by accident year in the footnotes of the 10-K.

 

Look at note 14, Unpaid Losses and Loss Adjustment Expenses. Is that what you are looking for?

[vinod1]

I might have misunderstood your question but Berkshire lists their IBNR and unpaid losses by accident year in the footnotes of the 10-K.

 

Look at note 14, Unpaid Losses and Loss Adjustment Expenses. Is that what you are looking for?

 

I trying to find the 10 year claims reserve triangle, just like FFH did for Northbridge on page 138 of 2009 AR. I have not been able to find this in any of the other companies reports.

 

Thanks

 

Vinod

[Kiltacular]

Hello Vinod,

 

Note that Berkshire's 10K is different (more exhaustive) than the info. presented in Berkshire's annual report.

 

Page 7 of the 10K actually has the loss triangle for Berkshire as a consolidated entity (with all insurance subs. presented as one).

 

I think you just have to get the actual 10K and you'll see it right there at the beginning.

[vinod1]

Hi Kiltacular,

 

Thanks a lot. Exactly what I was looking for.

 

Vinod

[Rabbitisrich]

The tables listed on page 7 appear to be policy year developments:

 

Liabilities assumed under retroactive reinsurance contracts are treated as occurrences in the year the contract was entered into, as opposed to when the underlying losses actually occurred, which is prior to the contract date.

 

Vinod1, what are the major advantages of analyzing accident year developments? Do you study those tables independently, or do you check it against policy year and calendar year triangles?

 

[vinod1]

The tables listed on page 7 appear to be policy year developments:

 

Liabilities assumed under retroactive reinsurance contracts are treated as occurrences in the year the contract was entered into, as opposed to when the underlying losses actually occurred, which is prior to the contract date.

 

Vinod1, what are the major advantages of analyzing accident year developments? Do you study those tables independently, or do you check it against policy year and calendar year triangles?

 

 

Rabbitisrich,

 

My understanding is that Policy year data would really be the ideal way to evaluate underwriting as it is the most accurate way to match premium received on a policy to the losses paid. The next most accurate way is Accident year development followed by Calendar year. Most companies seem to report only by Calendar year and just wanted to see if it would be possible to get by Accident year.

 

Vinod

[StubbleJumper]

The tables listed on page 7 appear to be policy year developments:

 

Liabilities assumed under retroactive reinsurance contracts are treated as occurrences in the year the contract was entered into, as opposed to when the underlying losses actually occurred, which is prior to the contract date.

 

Vinod1, what are the major advantages of analyzing accident year developments? Do you study those tables independently, or do you check it against policy year and calendar year triangles?

 

 

I really like the accident year tables.  First, since FFH went on a bit of an acquisition binge about 10 years ago, it helps show progress on "cleaning up" the underwriting shop.  When you are dealing with long-tail business, adverse development on reserves can arise due to a bad decision (or a series of bad decisions) a great many years ago.  It would be wrong to attribute this unpleasant outcome to the current management team.  With C&F in particular, much of their adverse development of the past was the result of asbestos and environment claims.  Policies that were written in 1978 came back to bite them on the ass in 2005.  The accident year data at least go some of the way to isolating management decisions and actual outcomes.  In those accident year triangles from FFH's statements, you can see clearly that management has hauled ass in the underwriting shops that they acquired....

 

SJ