Social inflation trends have been most evident in the continued adverse reserve development in certain long-tailed lines of business. This article focuses on commercial auto liability (CAL), commercial excess and umbrella lines (CX&U), and hospital professional liability (HPL), which have each experienced material and persistent adverse development of reserves since 2016, even with a slight softening in 2020. In this paper, we focus on whether some actuarial methods picked up on social inflation trends sooner than other methods, and whether trending development factors as a response to social inflation improves the accuracy of selected ultimate costs. For each of the three cohorts (CAL, CX&U, HPL), we examine:

• Average annual volume of calendar-year earned premium
• Ultimate ratios for each cohort
• Incremental gross reserve development to prior-year reserves
• Early detection methods: Chain ladder, Bornheutter-Ferguson method, and Benktander method
• Back-testing implied social inflation trends

Read the full article at the Casualty Actuarial Society's website here.