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Actuarial Risk Consultants LLC
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Loss Projection and Loss Probability Study A
loss projection includes actuarial estimates of ultimate loss costs for current
and future time periods. Since a
loss projection is probabilistic, a loss probability study is included so that
the potential variability will be recognized.
These analyses can be most useful in helping to select appropriate levels
of risk retention and policy limits. What
occurs is that as the retention level rises, the potential variability
increases. This variability is the
true risk for the insured, and the insured must determine his appetite for risk
in the casualty area. With the
maximum amount of risk that can be assumed in hand, an insured can approach the
insurance marketplace and evaluate the cost/benefits of any proposed insurance
program. A loss projection with its
accompanying loss probability study is usually completed prior to the renewal of
the insurance program so that it can be used in market negotiation process.
A general list of uses of loss projections include the following: ·
Insurance
budgeting ·
Determination
of funding requirements within deductible or self-insured retention ·
Negotiation
of price for aggregate coverage ·
Selection
of retention levels ·
Cost
allocation |
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