On Monday, October 25, the UW-Actuarial Club had the privilege to host Arpen Patel from Zurich North America to discuss actuarial reserving and loss development techniques. Patel has been with Zurich North America for 5 years. Currently, he is an Actuarial Analyst on the Technical Execution and Reserving team, working on the Specialty Lines of Business (Surety, Crop, Accident & Health). Prior to this, Arpen worked on Commercial Auto reserving at Zurich. Prior to joining Zurich, Arpen also has experience working in Personal Lines. Patel recently completed all of the requirements need to obtain his ACAS designation.
Throughout the presentation, the overarching theme discussed was actuarial reserving for property and casualty insurance. Patel explained the concept of reserving and why it is important for actuaries to consider when pricing insurance deals. In short, reserving is the process of calculating how much money needs to be set aside for losses that have not yet be incurred. Putting this money aside for claims that have not been made yet is essential to prepare for the future and make sure that the insurance company has enough cash to pay out their policy holders.
Patel also discussed some of the most common reserving methods actuaries use and how they work. The Chain Ladder Method is a development method that theorizes future losses are affected by current losses. The Bornhuetter Ferguson method states that the total estimate of losses are affected by current losses. Finally, the a priori method states that total estimate losses are unaffected by current losses. These three different methods are the most common development methods Patel uses at Zurich and it was incredibly insightful to hear how they are used in actuarial practice.
On behalf of the UW-Actuarial Club, we would like to thank Patel and the rest of the actuarial team at Zurich for providing our students with valuable actuarial information and tools they will be using in the near future!