Transitional Triangles

Introduction

A.M. Best is continuing its extensive analysis of the Transitional Triangles (TT) that can be derived from Forms 31, 32 and 34. Transitional Triangles (TT) have been used for mapping pre 2005 data to current reported data.

Premium Data

Premium and Vehicle years' figures for old regulations origin years are taken from the first return filed under the 2005 regulations or, if unavailable, the second return filed under the 2005 regulations.

For accident years NOT reported in 2005 regulations Premium and Vehicle years' figures for the previous regulations origin years are taken from the last return under those regulations.

Constraints

AM Best has used the following constraints:

  1. The TT data, as filed under the 31st December 2005 (or first return after), was not required to be externally audited.

  2. TT information was required to be filed for all reporting categories for which an equivalent form was required, under the de minimus rules, as set out in IPRU (INS) 9.20 for a firms’ first return under the 2005 Regulations.

  3. Firms that did not maintain records of historical development data by a required category for which it was required to prepare TT data were permitted, under IPRU(INS) 12.9 (8), to make a reasonable estimate for an entry required.

  4. Firms were permitted to omit a TT, if under the rule IPRU (INS) 12.2 (9):

    1. In the opinion of its governing body, the firm does not have the information needed to complete, or make, a reasonable estimate of the entry.

    2. That it does not use this omission when setting its provisions for claims liabilities for business in the required category.

  5. The following TT data was reported:

    1. Gross incremental claims paid.

    2. Gross cumulative claims incurred (excluding IBNR).

    3. Cumulative number of claims settled (this data was required to be gross of claims closed at zero cost and claims re-opened and not yet re-closed at the end of each development year).

    4. Number of reported claims (this TT could not be reconciled to previous data due to the TT rules).

  6. No data items were required for origin years ending before 31st December 1996, except for Reporting Categories 271 to 273, where the 30 most recent origin years have to be completed under the 2005 Regulations.  Where firms have reported outside these regulations the data has been captured within Best's Financial Suite – UK.

Analytical Enhancements

The following analytical enhancements have been made:

  1. To complement earlier 2009 enhancements the TT have been used for the mapping of pre 2005 data to current data.

  2. Previously “direct mapped Sterling only” data has now been mapped with the TT data to cover 80% of the market, given the “Constraints” as outlined above.