Bornhuetter-Ferguson Calculator
Calculate BF ultimate losses and IBNR reserves using the Bornhuetter-Ferguson actuarial method.
Inputs
$
$
Results
BF Ultimate Loss
$2,650,000.00
≈ 6 average U.S. homes
BF IBNR
$650,000.00
≈ 15 Teslas
Expected Losses$3,250,000.00
Unreported Factor0.2
Implied Loss Ratio53%
How to Use This Calculator
- Enter the selected loss development factor (LDF) for the accident year.
- Input the a priori expected loss ratio.
- Enter the earned premium for the accident year.
- Enter the actual paid losses to date.
- Review the BF ultimate loss estimate — a blend of the chain-ladder and expected loss methods.
How the result changes with Development Factor
| Development Factor | BF Ultimate Loss | BF IBNR |
|---|---|---|
| 1.9 | $3,539,525.00 | $1,539,525.00 |
| 4.15 | $4,466,750.00 | $2,466,750.00 |
| 6.85 | $4,775,500.00 | $2,775,500.00 |
| 9.1 | $4,892,825.00 | $2,892,825.00 |
What each input means
- Earned Premium
- Total earned premium for the accident year
- Expected Loss Ratio (%)
- A priori expected loss ratio based on industry data or prior years
- Reported Losses
- Currently reported/incurred losses for the accident year
- Development Factor
- Cumulative loss development factor from current evaluation to ultimate
How this is calculated
Worked example, using the default values
- Identify Input Parameters4 parametersEarned Premium = 5000000, Expected Loss Ratio (%) = 65, Reported Losses = 2000000, Development Factor = 1.25 = 4 input(s) provided
- Calculate BF Ultimate LossBF Ultimate Loss2650000 = $2,650,000
- Calculate BF IBNRBF IBNR650000 = $650,000
- Calculate Expected LossesExpected Losses3250000 = $3,250,000
- Calculate Unreported FactorUnreported Factor0.2 = 0.2
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