Michelle Bradley and Enoch Starnes recently authored an article for Captive International titled “Loss Development Factors: A Primer for Captives”. In it, they summarize the basic attributes of loss development factors, discuss their impact on retained risk, and respond to common questions regarding their use.
While the SIGMA team has written in the past about the ways in which one might track loss development for captives, we believe an opportunity has presented itself to acquaint new entrants to the captive insurance landscape with one of the core concepts that must be understood when retaining risk at any level: Loss Development Factors.
SIGMA’s An Actuarial Advantage book provides a summary of Loss Development Factors, and discusses how they are a critical part of any actuarial analysis. While the process of determining these factors is often misunderstood, An Actuarial Advantage proves to be a vital resource for interpreting Loss Development Factors, Loss Development Triangles, and even IBNR.
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