Better consideration of insurance cycles and economic trends and transparent reporting will help insurers improve their reserving practices, according to Swiss Re's latest sigma study.
The study, "Non-life claims reserving: improving on a strategic challenge," examined various reserving techniques used by insurers, reported factors that contribute to reserving errors, and suggested ways the industry can more effectively set reserves.
In explaining the factors that can cause reserve revisions, the study noted, "Reserving decisions are based on forecasts of final claims payments. Any significant mismatch between assumptions and reality leads to reserve revisions."
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