Exploring Loss Development Factors: SIGMA's Comprehensive Resources

Michelle Bradley, ACAS, MAAA, ARM, CERA, CCIS, Consulting Actuary and Enoch Starnes, ACI, Captive and Complex Risk Consultant

In 2011, SIGMA’s Tim Coomer authored a blog titled "Understanding Loss Development Factors” in response to the numerous questions we received on the concept of loss development. Since then, it has become SIGMA’s most viewed blog of all time and continues to receive significant amounts of views on a monthly basis. Between Tim's ability to break down complex topics and the pervasiveness of loss development factors in actuarial analytics, it's no surprise that the article has sustained such a high level of popularity. Consider, for example, some key highlights of what Tim was able to convey:

  • Differences between the various types of loss development factors – incurred, paid, claim count, etc.
  • The structure of a loss development triangle, which requires accumulating and summarizing data over many consecutive years.
  • How loss development patterns may be affected by legislative changes, shifts in geographic risk exposure, changes in retention, and many other factors.
  • The difficulties involved in selecting loss development factors when the historical data is volatile, lacks credibility, or exhibits abnormal trends.
  • Why some risks have development patterns that last for many years, whereas others may be relatively brief.

An abundance of material on loss development factors can also be found on SIGMA’s complimentary educational portal.  In particular, Chapter 2 of our book, An Actuarial Advantage, covers the topic in further detail, and the following resources offer additional insights and perspectives:

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