---
path: /guides/bornhuetter-ferguson
title: "The Bornhuetter-Ferguson method, explained"
description: "The Bornhuetter-Ferguson reserving method explained: how it blends an expected loss ratio with the chain ladder to stabilize estimates for immature accident years."
section: Resources
priority: 0.6
changefreq: monthly
source_file: pages/marketing/seo/articleData.ts
---

# The Bornhuetter-Ferguson method, explained

The Bornhuetter-Ferguson (BF) method is a reserving technique that blends an a priori expected-loss estimate with the chain ladder. It is most useful for immature accident years, where the chain ladder alone over-reacts to a thin, volatile diagonal.

## The intuition

The chain ladder leverages reported losses to project ultimates, which works well for mature years but becomes unstable when little has developed. BF addresses this by weighting between the chain ladder result and an a priori expectation (often an expected loss ratio times premium), using the expected percent reported as the weight.

Concretely, BF estimates ultimate losses as reported losses plus expected unreported losses, where the unreported portion is the a priori estimate multiplied by the proportion of losses still expected to emerge.

## When to use it

- Immature accident years where the chain ladder is volatile.
- Long-tailed lines where early development is sparse.
- As a cross-check against the chain ladder and expected-loss-ratio methods.