[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Inflationary Environment** ## Definition ==Inflationary Environment== refers to the economic conditions of rising prices that systematically increase claim costs over time, requiring adjustment of historical data and development patterns. ## Types of Inflation Affecting Claims - General price inflation (CPI) - Medical cost inflation - Wage inflation - Social inflation (legal costs, jury awards) - Repair/replacement cost inflation ## Impact on Reserving ``` High inflation requires: - Higher development factors - Larger tail factors - More aggressive trending - Careful selection of expected inflation ``` ## Adjustments - Apply trend factors - Update development patterns - Consider current inflation outlook - May need to modify historical patterns ## Related Concepts - [[Loss Trend#Definition]] - [[Trend#Definition]] ## References - Friedland, Chapter 1