What is the normal range for 1yr Reserve Development to PHS?

• A. < 20%
• B. < 15%
• C. < 25%
• D. < 10%

Answer: (A)

The main idea here is to understand how much reserves typically strengthen in the first year relative to the PHS amount. In practice, most of the long-tail reserve development shows up after the first year, so the one-year reserve development is usually a modest share of PHS. That makes a threshold of under 20% a common, normal benchmark. If the one-year development were to approach or exceed 25%, it would signal that initial reserves might have been too conservative or that there’s unusual development happening. So the normal range is therefore less than 20%.