AIG 2013 Annual Report Download - page 206

We generally use a combination of loss development methods For certain classes of business with sufficient loss volume,
and expected loss ratio methods for primary general liability or loss development methods may be given significant weight for
products liability classes. We also supplement the standard all but the most recent one or two accident years. For smaller
actuarial techniques by using evaluations of the ultimate or more volatile classes of business, loss development
losses on unusual claims or claim accumulations by external methods may be given limited weight for the five or more
specialists on those classes of claims. The segmentation of most recent accident years. Expected loss ratio methods are
the data reflects state differences, industry classes, used for the more recent accident years for these classes.
deductible/non-deductible programs and type of claim. The loss experience for primary general liability business is
generally reviewed at a level that is believed to provide the
most appropriate data for reserve analysis. Additionally,
certain sub-classes, such as construction, are generally
reviewed separately from business in other subclasses. In
2013, we continued to refine our loss reserving techniques for
the domestic primary casualty classes of business and
adopted further segmentations based on our analysis of the
differing emerging loss patterns for certain classes of
insureds. Due to the fairly long-tail nature of general liability
business, and the many subclasses that are reviewed
individually, there is less credibility given to the reported
losses and increased reliance on expected loss ratio methods
for recent accident years.
We generally use loss development methods for all but the Expected loss ratio methods are generally given significant
most recent accident year for commercial automobile liability weight only in the most recent accident year.
classes of business.
We generally use a combination of loss development methods The largest component of the healthcare business consists of
and expected loss ratio methods for healthcare classes of coverage written for hospitals and other healthcare facilities.
business. We test reserves for excess coverage separately from those
for primary coverage. For primary coverages, loss
Frequency/severity methods are sometimes used for pricing development methods are generally given the majority of the
certain healthcare accounts or business. However, for loss weight for all but the latest three accident years, and are
reserve adequacy testing, the need to ensure sufficient given some weight for all years other than the latest accident
credibility generally results in segmentations that are not year. For excess coverages, expected loss methods are
sufficiently homogenous to utilize frequency/severity methods. generally given all the weight for the latest three accident
years, and are also given considerable weight for accident
We also supplement the standard actuarial techniques by years prior to the latest three years. For other classes of
using evaluations of the ultimate losses on unusual claims by healthcare coverage, an analogous weighting between loss
specialists on those classes of claims. development and expected loss ratio methods is used. The
weights assigned to each method are those that are believed
to result in the best combination of responsiveness and
credibility.
Commercial Automobile Liability
Healthcare
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AIG 2013 Form 10-K188
ITEM 7 / CRITICAL ACCOUNTING ESTIMATES
General Liability
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Class of Business or Category and Actuarial Method Application of Actuarial Method