AIG 2011 Annual Report Download - page 113

Class of Business or Category and Actuarial Method Application of Actuarial Method
Professional Liability
AIG generally uses a combination of loss development Loss development methods are used for the more mature
methods and expected loss ratio methods for professional accident years. Greater weight is given to expected loss ratio
liability classes of business. methods in the more recent accident years. Reserves are
tested separately for claims made classes and classes written
Frequency/severity methods are used in pricing and on occurrence policy forms. Further segmentations are made
profitability analyses for some classes of professional liability; in a manner believed to provide an appropriate balance
however, for loss reserve testing, the need to enhance between credibility and homogeneity of the data.
credibility generally results in classes that are not sufficiently
homogenous to utilize frequency/severity methods.
Catastrophic Casualty
AIG uses expected loss ratio methods for all accident years The expected loss ratios and loss development assumptions
for catastrophic casualty business. This class of business used are based upon the results of prior accident years for
consists of casualty or financial lines coverage that attach in this business as well as for similar classes of business written
excess of very high attachment points; thus the claims above lower attachment points. The business is generally
experience is marked by very low frequency and high severity. written on a claims made basis. AIG uses ground-up claim
Because of the limited number of claims, loss development projections provided by AIG claims staff to assist in
methods are not used. developing the appropriate reserve.
Aviation
AIG generally uses a combination of loss development Expected loss ratio methods are used to determine the loss
methods and expected loss ratio methods for aviation reserves for the latest accident year.
exposures. Aviation claims are not very long-tail in nature;
however, they are driven by claim severity. Thus a
combination of both development and expected loss ratio
methods are used for all but the latest accident year to
determine the loss reserves.
Frequency/severity methods are not employed due to the
high severity nature of the claims and different mix of claims
from year to year.
Personal Auto (Domestic)
AIG generally uses frequency/severity methods and loss For many classes of business, greater reliance is placed on
development methods for domestic personal auto classes. frequency/severity methods as claim counts emerge quickly for
personal auto and allow for more immediate analysis of
resulting loss trends and comparisons to industry and other
diagnostic metrics.
Fidelity/Surety
AIG generally uses loss development methods for fidelity Expected loss ratio methods are also given weight for the
exposures for all but the latest accident year. For surety more recent accident years, and for the latest accident year
exposures, AIG generally uses the same method as for they may be given 100 percent weight.
short-tail classes (discussed below).
AIG 2011 Form 10-K 99