In the rightmost column of the Prior Years Row of Part 2, what two components are added?

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Multiple Choice

In the rightmost column of the Prior Years Row of Part 2, what two components are added?

In reserving and loss analytics, the total cost from a prior year’s claims is estimated by summing what has already been paid with what is still owed for those claims. The rightmost column in the Prior Years row typically shows this sum, combining cumulative paid losses with reserves. Paid losses reflect cash outlays to date, while reserves represent the estimated future payments for open or incurred-but-not-settled claims. Adding these gives the estimated ultimate losses for that year. Premiums are money collected, not losses, and expected losses are projections, not the actual paid plus future payments captured in reserves. The combination of cumulative paid losses and reserves is the standard way to arrive at the year’s ultimate loss estimate.

In reserving and loss analytics, the total cost from a prior year’s claims is estimated by summing what has already been paid with what is still owed for those claims. The rightmost column in the Prior Years row typically shows this sum, combining cumulative paid losses with reserves. Paid losses reflect cash outlays to date, while reserves represent the estimated future payments for open or incurred-but-not-settled claims. Adding these gives the estimated ultimate losses for that year.

Premiums are money collected, not losses, and expected losses are projections, not the actual paid plus future payments captured in reserves. The combination of cumulative paid losses and reserves is the standard way to arrive at the year’s ultimate loss estimate.

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