An actuarial technique for developing losses to estimate their ultimate amount.
An amount for expected unreported losses (derived using the reciprocal of the
loss development factor (LDF)) is added to actual reported losses to obtain the estimated
ultimate loss for a given accident year. The technique is most useful when actual
reported losses for an accident year are a poor indicator of future incurred
but not reported (IBNR) losses for the same accident year, as is often the case
when there is a low frequency of loss but a very high potential severity.