Inflation Impact on Non-life Reserving
2022 ended with a long period of low and stable inflation. The combined effects of the war in Ukraine, agricultural yields degraded by extreme weather events, and the decline in fossil fuel production have indeed led to significant cost increases in almost all economic sectors.
While most economists agree that 2023 should again be a year of high inflation, assumptions beyond that are highly uncertain. This new economic context has a major impact on P&C reserving, both from a methodological point of view but also on the ultimate results, especially for long-term lines of business.
Historic triangles are becoming too unstable, calling into question the validity of the assumptions underlying Chain-Ladder.
The objective of this workshop is to give some ideas on how to tackle the inflation problem in order to maintain the robustness of reserving and measure the impact on the ultimate results.
The causes of the inflation will be explained, as the perspectives for the forthcoming years. We will present a common process to retreat the triangles and to project future inflation, as the Verbeek-Taylor and the Vasicek methods.