Loss Trend Chapter 15

[zhbuyi]

Page 288.

The chapter is on experience modification. But I just need to make sure I understand the trend from and trend to calculation.

We are trending losses from policy year 7/1/08-09 to prospective policy year 7/1/10-11. Based on what I learned from Chapter 6, page 114, I figured we should trend from 7/1/09 to 7/1/11 (both are average accident date). Although the trend period is also 2 years--the same as the text book, however the textbook trend from 1/1/09 to 1/1/11.

Could you let me know where I got it wrong? Thanks

[Vorian Atreides]

Chapter 6 is talking about trending information for a portfolio of policies. In Chapter 15, you're usually dealing with a single (very large) policy. Suppose that the policy is in force from 7/1/X4 to 6/30/X5. They may still refer to this as being "policy year X4", but the (average) written date would be 7/1/X4 (there's only one policy to deal with) and the average accident date will be the mid-point of the policy (1/1/X5).

The reference to "policy year" here is a convenience since there is likely a multi-year contract in effect (or a guarantee renewal).