1-Year Reserve Development

The percentage increase or decrease in the company’s annual reserve estimate compared to the previous year. If last year’s estimate is below that of this year, this will result in a positive ratio meaning that the company underestimated its future claims and set aside insufficient reserves. Making this error consistently is viewed negatively because it means the company is inflating its income and capital.

2-Year Reserve Development

This ratio is similar to the One-Year Reserve Development ratio. However, instead of comparing the latest estimates with those from the prior year, it compares them to the estimates from two years ago. Again, a positive ratio means the company underestimated its reserve needs while a negative ratio indicates that reserve needs were overestimated.

Weiss Ratings