Inflation From All Sides

This presentation, given at the Spring Meeting of the Casualty Actuarial Society in Colorado Springs, Colorado, discusses inflation and loss trends and how they can affect the pricing and reserving of property/casualty insurance companies. The presentation discusses various measures of inflation and the advantages and disadvantages of each, and particularly how they affect property/casualty loss trends. It discusses the idea that loss trends are typically higher than standard inflation measures, then notes that for several lines of business, this has not been the case over the past few years. Actuaries and the companies they work for should be watchful for a spike in inflation or a return of trend to normal. Finally, the paper attempts to quantify the impact industrywide of a sudden long-term increase in inflation, loss trend or both.