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Old 07-18-2003, 04:56 PM
2bActuary 2bActuary is offline
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Default Cash flow projection

Hi, anybody out there, may you advice how to project next month's indemniity payment and Alae expense. I feel the time interval makes it even tougher than other time intervals such as quarterly. Thanks.
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Old 07-21-2003, 11:25 AM
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I think a wee bit more specific information is needed before anyone can advise intelligently on this matter.
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"No one remembers 5K and I wrote a nice poem for the occassion. No one remember's 10k. No one will remember 20k either." - Sir Post-A-Lot

"One of the ordinary modes, by which tyrants accomplish their purposes without resistance, is, by disarming the people, and making it an offense to keep arms."
-- Constitutional scholar and Supreme Court Justice Joseph Story, 1840

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Old 07-21-2003, 12:05 PM
2bActuary 2bActuary is offline
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Default Cash flow projection

I am looking for a good model to project loss and ALAE payment on the monthly basis for auto liability and physical damage. And please let me know what else specific info you think makes it easier for intelligent help.
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Old 07-21-2003, 12:15 PM
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I'd start by performing an actuarial projection of ultimate losses by accident year (AY). You will probably use several methods to do this. Then, I'd back into the implicit age-ultimate paid loss development factors or you could use the paid loss development factors underlying your analyis. Then, I'd interpolate the paid loss development factors by month. You could use linear interpolation beyond 24 months and exponential interpolation before 24 months. Finally, I'd apply the loss development factors to the outstanding losses plus next month's incurred losses.

For example, let's assume you have AY 1999 as follows.

Outstanding losses Incremental Paid % Next Month's Paid
$100,000 5.0% $5,000

where the incremental paid = the difference between the paid LDF as of this month and the paid LDF as of next month. The outstanding losses equal the sum of case reserves plus IBNR losses.

Remember, for the most recent period, you'll have to include the accrual of new losses occurring next month and subtracting out the amount of next month's accrual that will be paid next month.
__________________
Spoiler:
* * * * * *
"No one remembers 5K and I wrote a nice poem for the occassion. No one remember's 10k. No one will remember 20k either." - Sir Post-A-Lot

"One of the ordinary modes, by which tyrants accomplish their purposes without resistance, is, by disarming the people, and making it an offense to keep arms."
-- Constitutional scholar and Supreme Court Justice Joseph Story, 1840

"The problem with socialism is you eventually run out of other peoples' money." -- Margaret Thatcher

"Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master." -- George Washington

"Caca pasa" - Anonymous
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