Lee Bowron (Kerper and Bowron LLC) – Contract-level cash-flow projection for service contracts and manufacturer warranties

Service contracts and manufacturer warranties are large short-duration liability books that are still commonly reserved with a single aggregate earning curve.

This talk describes a contract(or warranty)-level alternative: from point-of-sale data only, each contract is given a month-by-month probabilistic projection of expected claims, expected cancellations, and value emergence. Those streams define an Earned Contract schedule and roll up to revenue recognition, liability measurement, and a portfolio cash-flow file that can also be used for structured risk transfer.

The method was published in Risks (2026) with an additional paper available on SSRN and under peer review. I will outline the three modelling steps (exposure, GLM pure premium, projection), the accounting use under IFRS 17 / ASC 606 and the Solvency II best-estimate discussion for finite predictable risks, and what changes when the unit of account is the contract-month rather than the block.