Introduction To Ratemaking And Loss Reserving For Property And Casualty Insurance -

Ratemaking is not a simple average of last year’s losses. Actuaries must adjust for three major forces:

Rate Change Factor=A−EERate Change Factor equals the fraction with numerator cap A minus cap E and denominator cap E end-fraction Part 2: Principles of Loss Reserving Ratemaking is not a simple average of last year’s losses

For volatile lines (hurricane, earthquake), historical average losses are insufficient. Insurers incorporate: Ratemaking is not a simple average of last year’s losses