AIG 2012 Annual Report Download - page 199

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Class of Business or Category and Actuarial Method Application of Actuarial Method
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
experts on those classes of claims. The segmentation of the most recent accident years. Expected loss ratio methods are
data reflects state differences, industry classes, deductible/ used for the more recent accident years for these classes.
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. 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 classes weight only in the most recent accident year.
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, in testing weight for all but the latest three accident years, and are
loss reserves the business is generally combined into larger given some weight for all years other than the latest accident
groupings to enhance the credibility of the loss experience. year. For excess coverages, expected loss methods are
generally given all the weight for the latest three accident
We also supplement the standard actuarial techniques by
years, and are also given considerable weight for accident
using evaluations of the ultimate losses on unusual claims by
years prior to the latest three years. For other classes of
experts on those classes of claims.
healthcare coverage, an analogous weighting between loss
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.
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AIG 2012 Form 10-K182
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General Liability
Commercial Automobile Liability
Healthcare
ITEM 7 / CRITICAL ACCOUNTING ESTIMATES