The process of estimating the ultimate losses resulting from an insurance company’s business is one of the most important tasks facing management. Many types of policies expose an insurer to liabilities over a very long period of time where the ultimate payout to policyholders will not be certain for years or even decades. Despite this uncertainty, management must estimate loss reserves for each financial reporting period. The credibility of these estimates depends, in part, on management’s track record with prior estimates. Read this article for more details.
Examining Berkshire Hathaway’s Loss Estimation Accuracy
