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Bornhuetter-Ferguson technique

The Bornhuetter-Ferguson technique is an actuarial technique for developing losses to estimate their ultimate amount.

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Bornhuetter-Ferguson technique

The Bornhuetter-Ferguson technique is an actuarial technique for developing losses to estimate their ultimate amount.

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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.