Introduction To Ratemaking And Loss Reserving For Property And Casualty Insurance

The chain ladder trusts the data entirely. The B-F method distrusts early data and blends an expected loss ratio (from pricing) with observed development. It is excellent for new, volatile accident years where paid data is sparse.

A good actuarial practice uses from reserving to inform loss trend in ratemaking. For example, if the chain ladder shows medical claim costs are inflating at 7% per year, the pricing actuary builds a 7% annual trend factor into future rates. The chain ladder trusts the data entirely