Loss Development
Categories: Insurance
Loss development is the difference between the final losses recorded by an insurance company...and what they originally estimated or recorded (so it's the losses that develop as time goes on).
Insurance companies set aside reserves to cover their estimates of what claims will cost, but even the best underwriter or actuary can't control all the factors. Claims can take a long time to settle, and there tends to be an uptick of reported claims after the initial reporting period. More often that not, the estimate and the actual won't match, and that difference is the loss development.