Question

What challenge arises when building in IBNR and reported claims development into sub-class reserves?

a.

Lack of relevant applicable claims experience

b.

Limited statistical variances

c.

Difficulty in premium setting for underwriters

d.

Homogeneity of sub-classes

Posted under IC 14 Regulations of Insurance Business

Answer: (a).Lack of relevant applicable claims experience Explanation:One challenge when building in IBNR (Incurred But Not Reported) and reported claims development into sub-class reserves is the lack of relevant applicable claims experience. This challenge is particularly evident in changing business environments, long tail classes, and in cases of new and emerging risks where historical data may be limited or not applicable.

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Q. What challenge arises when building in IBNR and reported claims development into sub-class reserves?
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