[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Accident Year** ## Definition ==Accident Year== Accident year is a data organization method where losses are grouped by the year in which the accident or loss event occurred, regardless of when the policy was written or when the loss was reported. ## Key Features ### Matching Period - Losses matched to exposure period - Independent of policy effective date - Standard method for ratemaking ### Development - Develops faster than policy year - Slower than report year - Typical development period varies by line of business ## Industry Standard Accident year is the most common organization method for ratemaking because: 1. Matches losses to rating period 2. Consistent with exposure base timing 3. Easier to trend than policy year 4. Industry convention for rate filings ## Uses **Ratemaking** - Rate level indications - Loss cost projections - Trend analysis **Reserving** - IBNR calculations - Loss development - Ultimate loss projections **Analysis** - Loss ratio calculations - Underwriting results - Pricing adequacy ## Calculation ### Accident Year Losses - All losses occurring during the calendar year - Includes reported and unreported (IBNR) - At various development stages ### Accident Year Premium - Earned premium during the calendar year - Matches exposure period for losses - Calculated from written premium and unearned amounts ## Example ``` Accident Year 2024 includes: Losses: - All losses with occurrence date in 2024 - Regardless of policy effective date - Regardless of report date - Including IBNR for unreported claims Premium: - Earned during 2024 - From policies effective in 2023, 2024, 2025 Example loss: - Policy effective: 10/1/2023 - Loss date: 3/15/2024 ← Accident Year 2024 - Report date: 4/1/2024 - Payment date: 8/1/2024 ``` ## Relationship to Other Methods **Accident Year vs Policy Year** - AY develops faster (no policy term lag) - AY is industry standard for ratemaking - PY better for underwriting profitability **Accident Year vs Report Year** - AY matches exposure period - RY useful for claims-made coverage - AY standard for occurrence policies ## Special Considerations **Catastrophes** - Identified by accident date - May require separate treatment - Can distort historical patterns **Long-Tail Lines** - May take many years to develop fully - IBNR estimation critical - Development patterns essential ## Related Concepts - [[Ratemaking Data Organization]] - [[Policy Year]] - [[Report Year]] - [[Occurrence Coverage]] - [[Loss Development Triangle]] ## References - Werner & Modlin, Chapter 3 - Friedland, Chapter 2