Reserve for claims that already happened but have not been paid.
Claims already happened. Most of the money has not been paid yet.
This is a run-off triangle: cumulative claims paid, by origin year (rows) and development year (columns). The upper-left is history. The lower-right is your problem - money you owe but have not paid, and must hold reserves against today.
LINK RATIOShow claims mature
CHAIN LADDERproject to ultimate
IBNRultimate minus paid
BORNHUETTER-FERGUSONwhen the data is thin
Interview lens: every reserving interview starts here. Get the link ratios right, then know the one situation where chain ladder blows up.