CISR Elements Of Risk Management Practice Test

Loss development is the process of adjusting past loss data to reflect what those losses are likely to become at a common evaluation date, incorporating how claims mature over time. This includes settlement lag (claims taking time to settle), frequency development (more claims are recognized as time passes), IBNR (incurred but not reported) reserves, and inflation (changing monetary values). Using development factors, actuaries align historical data with the eventual cost to support accurate reserves and trend analysis. Other options describe related ideas—loss trending looks at how costs change over time, inflation indexing adjusts for price changes rather than the pattern of claim development, and claims forecasting projects future claims rather than retroactively adjusting past data.