Two reserve analysts pull the same claim file and reach different reserves. The reason is rarely the data. It is how each one grouped the transactions into years.
A claim has several dates: the accident date, the report date, each payment date, and the effective date of its policy. Each reserve basis picks one of those dates to sort the claim into a year. The choice controls which claims land in which row of your triangle, and therefore what your development factors look like.
KEY: The reserve basis is just a rule for choosing which date defines the year. Same claims, different sorting date, different diagonal.
Before you sort a claim, name its dates. Friedland's data-organization framework lists five key dates: the policy effective date, the accident date, the report date, the accounting date, and the valuation date. The first three define the bases above. The last two govern the reserve study itself.
The accounting date fixes which incurred claims your liability covers. It is the cutoff that says "estimate the unpaid amount for every claim incurred on or before this date." A...
Common mistakes
- Treating calendar-year incurred as accident-year losses. Calendar-year incurred at $4,500,000 mixes many accident years; it is not the loss for accidents in that year.
- Assuming policy year covers 12 months of accidents. It covers 24 months. Using a 12-month exposure understates policy-year ultimates by roughly half.
- Sorting a claim by payment date on an accident-year triangle. A 2025 payment on a 2023 accident stays in accident year 2023, not 2025. Only calendar year uses the transaction date.
Bottom line
- Calendar year groups by when a transaction happened; it closes at year-end and never changes afterward.
- Accident year groups losses by the date the loss occurred, regardless of when reported or paid.
- Policy year groups losses by the effective date of the policy that covered them; it spans 24 months of exposure.
- Underwriting year is the reinsurance name for policy year; it groups by the year the treaty or policy was underwritten.
Exam shortcut
Ask "which date defines the year?" Transaction date is calendar, loss date is accident, policy effective date is policy or underwriting, report date is report year. That one question sorts any claim. If a question mentions 24 months of exposure or blended rate levels, it is a policy year. If it mentions frozen year-end figures, it is calendar year. If it says claims-made or no IBNR, it is report year.
The full lesson (about 2,604 words, 17 min read) adds 3 worked examples, all 8 common mistakes, a self-check, free in the app.
Learning objectives
- B1
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