AIG 2014 Annual Report Download - page 208

ITEM 7 / CRITICAL ACCOUNTING ESTIMATES
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Class of Business or Category and Actuarial Method Application of Actuarial Method
Aviation
We generally use a combination of loss development
methods and expected loss ratio methods for aviation
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.
Expected loss ratio methods are used to determine the
loss reserves for the latest accident year. We also use
ground-up claim projections provided by our claims
staff to assist in developing the appropriate reserve.
Personal Auto
We generally use frequency/severity methods and loss
development methods for domestic personal auto
classes.
For many classes of business, greater reliance is
placed on 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
We generally use loss development methods for fidelity
exposures for all but the latest accident year. For surety
exposures, we generally use the same method as for short-
tail classes (discussed below).
Expected loss ratio methods are also given weight for the
more recent accident years. For the latest accident year they
may be given 100 percent weight.