Characteristics of London Market Business
The most important thing in reserving London Market business is to understand the exposures. For example, coverage may result in claims not being visible in the data for a number of years, with large surges of claims at particular times. It is vital to know this in advance to make allowance for it proactively rather than reacting to claim movements as they happen.
London Market business is very varied in its nature. There are property classes with short reporting lags and short periods to payment. There are liability classes with large reporting lags and/or long settlement periods. There are warranty classes with long exposure periods.
Business in the London Market may be on occurrence, claim made or risks attaching bases. It may be direct or far away from the primary layer. The underwriter may be the leader of the risk or alternatively the business may have been written vicariously by a Managing General Agent.
Business from around the world comes to London. That makes the nature of the claims variable even for similar classes of business. Tort claims in the US are very different to tort claims in the UK.
In summary, the reserving of a London Market book of business tends to suffer from a large degree of heterogeneity. Standard triangle projection techniques are insufficient to capture the possibilities inherent in this heterogeneity.
Techniques for Reserving a London Market Book of Business
