Which term describes the practice of gradually increasing a claim reserve as new information becomes available?

Which term describes the practice of gradually increasing a claim reserve as new information becomes available?

• A. Reopening
• B. Stairstepping
• C. Readjusting
• D. Incremental reserving

Answer: (B)

The concept here is updating reserves in a stepwise fashion as new information becomes available. In claims reserving, you continually refine the expected cost of claims as more development data comes in—severity, payout patterns, defense costs, and settlement timing—so you don’t adjust all at once. Instead, the reserve is raised in increments over time, creating a staircase pattern as each new piece of information is incorporated. That stepwise, information-driven increase is exactly what stairstepping describes. Reopening a closed claim is about bringing a file back into active consideration, which is not about the ongoing reserve pattern. Readjusting is too generic, and while incremental reserving could fit in some contexts, it doesn’t specifically capture the characteristic stair-step increases that stairstepping conveys.

The concept here is updating reserves in a stepwise fashion as new information becomes available. In claims reserving, you continually refine the expected cost of claims as more development data comes in—severity, payout patterns, defense costs, and settlement timing—so you don’t adjust all at once. Instead, the reserve is raised in increments over time, creating a staircase pattern as each new piece of information is incorporated. That stepwise, information-driven increase is exactly what stairstepping describes. Reopening a closed claim is about bringing a file back into active consideration, which is not about the ongoing reserve pattern. Readjusting is too generic, and while incremental reserving could fit in some contexts, it doesn’t specifically capture the characteristic stair-step increases that stairstepping conveys.