Estimation and Calculation Procedures of the Technical Provisions for Outstanding Insurance Claims

• Main Authors: Matvejevs Aleksandrs, Malyarenko Anatoliy, Matvejevs Andrejs
• Format: Article
• Language: English
• Published: Sciendo 2014-07-01
• Series: Applied Computer Systems
• Subjects: excess of loss; insurance technical provisions; motor vehicle liability insurance; outstanding insurance claims; loss burden triangle
• Online Access: https://doi.org/10.2478/acss-2014-0002

The paper presents algorithms for insurance technical provisions taking into account losses, which are incurred but not reported. Evaluation of insurance technical provisions for the kinds of insurance, such as Motor Third Party Liability (MTPL) Insurance, Property Insurance and some others, have difficulties in assessing the impact of the losses from insurance claims incurred requiring a longer time for the settlement of insurance claims. These insurance requirements are mainly associated with health insurance in the MTPL Insurance, losses related to compensation for moral injuries, as well as on life care and life-long pension. To run these payments, you need to know the financial indicators for the period of settlement of loss (such as the effective interest rate, investment income, etc.) In the article the procedures for the most accurate forecast possible losses for the expected excess of loss amount for a treaty year are provided, using the loss experience of the previous years of the occurrence with their development. However, certain adjustments should be made to take account of the impact of losses from previous years for the current period. This article describes how outstanding losses have to be projected on a year of reporting, so that they are correspond to the current values