Weighted Average Loss Forecasting

A method of forecasting losses that assigns greater weight, typically to more recent years, when developing a forecast of future losses. Recent years receive a greater weight because they tend to more closely approximate current conditions (e.g., benefit levels, nature of company operations, medical expenses).

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Working Layer

A dollar range in which an insured or, in the case of an insurance portfolio, a group of insureds, is expected to experience a fairly high level of loss frequency. For many organizations, this loss frequency is adequate to provide some degree of statistical credibility to actuarial forecasts of the total expected losses during a specific period of time, e.g., 1 year. This is the layer typically subject to deductibles, self-insured retentions, retrospective rating, and similar programs.

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