[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Salvage and Subrogation** ## Definition ==Salvage and Subrogation== are recoveries that reduce an insurer's ultimate loss payments through the sale of damaged property (salvage) or recovery from responsible third parties (subrogation). ## Salvage Sale or value recovery from damaged property: - Auto total loss vehicles - Damaged goods - Scrap value - Recovered stolen property ## Subrogation Recovery from liable third parties: - At-fault driver in auto claims - Product manufacturers - Other responsible parties - Workers comp from third parties ## Reserving Treatment ### Separate Projection ``` Gross Ultimate = Losses before S&S S&S Ultimate = Projected recoveries Net Ultimate = Gross - S&S ``` ### Development Patterns ``` S&S may develop differently than losses: - Often slower development - Different reporting patterns - Separate triangles recommended ``` ## Example ``` Auto Collision Claims: Gross losses: $1,000,000 Salvage (sold totaled vehicles): $150,000 Subrogation (from at-fault parties): $50,000 Net losses: $800,000 Reserve by component: Gross: Use gross development S&S: Use S&S development patterns Net: Gross - S&S ``` ## Related Concepts - [[Deductible Recovery#Definition]] - [[Reinsurance Recovery#Definition]] ## References - Friedland, Chapter 9