13.2 6 Components to a Reinsurance Loss Reserve

6 components of a reinsurer’s loss reserve

1. Case reserve reported by cedent

   • Can individual case reports (XS contracts) or reported in bulk (proportional contracts)

2. Additional Case reserve from reinsurer (ACR)

   • From reinsurer’s claim department’s review of individual case reserve reports

   • May vary considerably by contract and cedant

3. IBNER

4. Pure IBNR

5. Discount for future investment income

   • For tabular discount as well as for tax purposes

   • Tabular discount is on (WC permanent total, auto PIP annuity claims and medical PL)

6. Risk Load

   • For adverse deviation so uncertain income doesn’t flow into profits too quickly

   • Can be implicitly built into the reserving assumptions or explicitly