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Old 03-11-2018, 09:47 PM
Yamamay Yamamay is offline
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Default IBNR projection

As part of my valuation work, I'm trying to project the values of IBNR at future dates. What is the IBNR next quarter?
No change? Or is it lower? What about in 5 years? Should it be higher than today because I expect to have a lot of New Business?
I'm thinking about DI or LTC, but would be interested in a P&C perspective.

I mostly see two possibilities:
- same pattern as the reserve for a new claim (not so clear what this would be for P&C, but easy to get a pattern for a DI or LTC claim):
This way, you can use the decrease in IBNR to deduce the Benefits paid. In your income statement, there'd be a decrease in IBNR offset by these Benefits paid.
- the pattern of your expected future Time 0 IBNRs (by making assumptions on the amount of business you'll have in the future, or by assuming an increased lag in reporting for instance):
You would need to project some Benefits paid though right ?

This has confused me for a while. I'd appreciate your input.

Last edited by Yamamay; 03-11-2018 at 10:29 PM..
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Old 03-11-2018, 09:55 PM
Westley Westley is offline
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Coming from a P&C perspective, but your question makes no sense at all. "What should be the pattern of IBNR" is like "What should be the company's strategy" or "What should I do to find a wife". There are so many things unclear from those questions, I don't even know where to start. What the current situation is, the entire context, what you're trying to project and what you want to accomplish. I assume you know what you're actually trying to figure out, but you don't seem to make any effort to tell us what that is at all.

Maybe a DI or LTC person will think it makes more sense.
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Old 03-11-2018, 10:03 PM
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Quote:
Originally Posted by Westley View Post
Coming from a P&C perspective, but your question makes no sense at all. "What should be the pattern of IBNR" is like "What should be the company's strategy" or "What should I do to find a wife". There are so many things unclear from those questions, I don't even know where to start. What the current situation is, the entire context, what you're trying to project and what you want to accomplish. I assume you know what you're actually trying to figure out, but you don't seem to make any effort to tell us what that is at all.

Maybe a DI or LTC person will think it makes more sense.
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Old 03-11-2018, 10:06 PM
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Although the OP has posted in the exam 5 forum so presumably is on the P&C side. Which is making this question even more confusing to me.
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Old 03-11-2018, 10:10 PM
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What is LTC or DI?
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Old 03-11-2018, 10:14 PM
CuriousGeorge CuriousGeorge is offline
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What is LTC or DI?
Long Term Care and Disability Income.
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Old 03-11-2018, 10:25 PM
Yamamay Yamamay is offline
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I didn't realize it wasn't obvious. I'll edit the OP.
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Old 03-11-2018, 10:40 PM
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JohnLocke JohnLocke is offline
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Quote:
Originally Posted by Westley View Post
Coming from a P&C perspective, but your question makes no sense at all. "What should be the pattern of IBNR" is like "What should be the company's strategy" or "What should I do to find a wife". There are so many things unclear from those questions, I don't even know where to start. What the current situation is, the entire context, what you're trying to project and what you want to accomplish. I assume you know what you're actually trying to figure out, but you don't seem to make any effort to tell us what that is at all.

Maybe a DI or LTC person will think it makes more sense.
I think the "should" was really in the context of trying to project financial results. The general rule is that IBNR will roughly grow/shrink with your book of business. For a large book of DI or LTC it could be relatively stable and so a projection tied to premium or membership is probably the way to go.

OP, what are you trying to accomplish? I'm really confused about the references for P&C to non-P&C products.
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Old 03-11-2018, 10:50 PM
Yamamay Yamamay is offline
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Quote:
Originally Posted by JohnLocke View Post
I think the "should" was really in the context of trying to project financial results. The general rule is that IBNR will roughly grow/shrink with your book of business. For a large book of DI or LTC it could be relatively stable and so a projection tied to premium or membership is probably the way to go.

OP, what are you trying to accomplish? I'm really confused about the references for P&C to non-P&C products.
You're right about the context. I suppose I'm eventually trying to have an accurate projected income for the current Full Year, or for the next years. Following your idea, I would need to add some cash payments to represent the benefits paid to those people that have not reported their claim yet, correct ? Otherwise I'd be overestimating the income.
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Old 03-12-2018, 12:04 AM
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Future projected incurred claims could either be reported claims or IBNR. If the established incurred claim estimate is $X for either, I don't see the point of the distinction. It seems like you would be splitting incidence for no real value.
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