Exam 7: A tail factor can dominate an immature estimate
A tail factor extends development beyond the observed ages. Its impact depends on the remaining amount and the uncertainty in extrapolation. Treat tail selection as an assumption with evidence, not as a default number copied between lines.
Worked example or practice scenario
If a pre-tail ultimate estimate is 8m, a tail factor of 1.05 produces 8.4m; 1.10 produces 8.8m. The 400,000 difference is material even though the factors look close. These are original sensitivity numbers, not an estimated industry tail.
Try this next
Compare relevant mature experience and alternative extrapolations, then explain applicability to the segment. Separate a tail sensitivity from a probabilistic uncertainty interval. The latter requires a specified model and distribution.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.