AIG 2015 Annual Report Download - page 205

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
Frequency/severity and loss development methods are
utilized for domestic personal auto classes.
For these classes of business, reliance is placed on
frequency/severity methods as claim counts emerge
quickly for personal auto. Frequency/severity methods
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. We also
use claim department projections of the ultimate value
of each reported claim to supplement and inform the
standard actuarial approaches and some weight is
given to this method in the more recent accident years.
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.