|How to generate reserve from
simulated claim transactions (Crystal Ball)
For actuaries, you can think of the crystal ball
You can summarize the
claim transactions into an incremental paid development rectangle by accident year (or
quarter, etc) by development period (year, quarter, etc) such that you show
enough development periods that ALL of the claims are completely settled.
You can then split this rectangle into two triangles -- the first (upper
left) is a typical loss development triangle with information as of a certain
evaluation date, and the second triangle (lower right) is the rest of the
development to ultimate for those claims after the evaluation date. At the
evaluation date, the second triangle is the crystal ball for what will happen
for those claims (for that one iteration of the model).