What is the equation to determine total paid losses that will impact reserves next month?

Total paid losses that will impact reserves next month can be accurately determined by using the equation that involves the Loss Payment Unit (LPU) for the current month multiplied by the number of units. This approach is grounded in the concept of analyzing how much loss is being incurred per unit and then aggregating that over the total units involved. By multiplying the LPU by the number of units, you derive the total monetary losses expected, which directly influences the reserves because reserves are established to cover anticipated future claims or losses.

This method provides a clear and straightforward calculation for forecasting how much needs to be set aside to manage upcoming claims effectively. It allows for a focused understanding of the losses that will affect finances going forward, ensuring that the reserves are adequately funded based on current activity.