What is the formula for the company development factor by line?

• A. Company development factor = sum of incurred loss & DCC from 9 prior AYs evaluated as of the current year / sum of initial valuations of the same AYs
• B. Company development factor = average of last 9 years' development factors
• C. Company development factor = product of annual development factors
• D. Company development factor = sum of current year losses

Answer: (A)

In reserving and development analysis, the company development factor by line measures how much losses have developed relative to the initial estimates for recent accident years. It shows the overall growth in the reserve base as those years are evaluated in the current year.

The correct approach is to take the total incurred losses plus DCC for nine prior accident years as evaluated in the current year, and divide that by the sum of the initial valuations for the same nine accident years. This ratio captures the cumulative development across those years, providing a single multiplier that reflects how much more (or less) has been observed since the initial estimates.

Other options don’t fit because they either rely on averages, products, or current-year losses alone, which don’t aggregate the development across multiple prior accident years in relation to their initial estimates.