Chain Ladder

The Chain Ladder Method is used to forecast the reserve that must be established for a particular year to cover future losses. The exercise uses projected losses from the triangulation method. The Chain Ladder Method requires the Cumulative Paid Triangle and Cumulative Reported Losses Triangle as a prerequisite, however, the application enables the modification of the basis of these calculations and different Triangles can be selected. For more information on how to use the Methods feature in the application, see the Methods Section.

We are assuming that the claims for the first accident year are completely run-off; that is, the amount incurred is fully paid off for the first accident year.