What is reserving in insurance and what methods are used in it?

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Accepted Answer

Reserving in insurance is the process of estimating future claims and setting aside funds to cover them.

Reserving involves predicting the amount of money that will be needed to pay for future claims.
Methods used in reserving include the chain-ladder method, Bornhuetter-Ferguson method, and loss ratio method.
The chain-ladder method extrapolates past claims development patterns into the future.
The Bornhuetter-Ferguson method combines past experience with expected future experience to estimate ultimate losses.
The loss ratio method calculates reserves based on historical loss ratios.
Reserving is crucial for insurance companies to ensure they have enough funds to cover future claims and liabilities.

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