Expected Loss Ratio IBNR Calculator
Estimate unreported losses by subtracting reported incurred losses from expected ultimate losses implied by an expected loss ratio.
Description
Estimate unreported losses from earned premium, a selected expected loss ratio, and reported incurred losses.
Expected Loss Ratio IBNR helps you estimate unreported losses from earned premium, a selected expected loss ratio, and reported incurred losses.
Use this tool for a simple expected-loss-method estimate when premium and a defensible a priori loss ratio are available. It calculates expected ultimate losses and subtracts reported incurred losses to show the implied unreported component.
When to use Expected Loss Ratio IBNR
Use this tool for a simple expected-loss-method estimate when premium and a defensible a priori loss ratio are available. It calculates expected ultimate losses and subtracts reported incurred losses to show the implied unreported component.1
How the calculation works
Expected ultimate loss equals earned premium multiplied by the selected expected loss ratio. Reported incurred losses, including case reserves if present in the chosen basis, are then subtracted.
Unreported loss estimate = EP × ELR − reported incurred losses 1Inputs and interpretation
Earned premium, reported incurred losses, and the expected loss ratio must describe the same segment, accident or underwriting period, valuation date, and currency basis.
Assumptions and limitations
A negative result signals that reported incurred losses exceed the selected expected ultimate; it should be investigated rather than automatically booked as a negative reserve. The method is highly sensitive to premium adequacy and the chosen ELR and does not use emergence experience.
References
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Bornhuetter-Ferguson Initial Expected Loss Ratio Working Party Paper — Casualty Actuarial Society