The Kerper Bowron Method
Contract-level accounting for service contracts. The KB Method replaces aggregate earning curves with month-by-month expected cash flows for every individual contract — built from point-of-sale data and aligned with Solvency II, IFRS 17, and ASC 606.
As published in Risks (MDPI) · Featured in Business Alabama · Announced on Business Wire
From aggregate curves to contract-level truth
For more than forty years, the service contract industry has earned premium and estimated losses with aggregate earning curves — one backward-looking shape applied to an entire block of business. The Kerper Bowron Method works from the opposite direction: it prices the future one contract at a time.
Industry practice
Aggregate earning curves and block-level reserving built on industry averages and summary experience, with subjective assumptions layered on top.
Slow to adapt when the mix of business shifts, difficult to audit at the contract level, and structurally unable to satisfy modern accounting standards simultaneously.
The KB Method
A precise, month-by-month stream of expected claim and cancellation payments for every individual contract, generated from point-of-sale data alone.
Auditable, contract-specific accounting that adapts to actual experience as it emerges — and rolls up cleanly into reserves, earnings, liabilities, and asset estimates.
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Start at the point of sale
Term, mileage, coverage, deductible, vehicle profile, price, and additional factors — data every seller already captures.
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Model exposure probabilistically
A probabilistic exposure base for each month of the contract replaces the traditional expected-miles assumption.
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Project every cash flow
Generalized Linear Models produce expected claim and cancellation payments, month by month, contract by contract.
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Earn with the Earned Contract formula
Revenue, reserves, and liabilities follow directly from the projected cash-flow stream — and update as experience develops.
One calculation, three frameworks
Existing aggregate methods cannot satisfy modern accounting and solvency standards simultaneously while keeping contract-level granularity. The KB Method was built to meet all three at once.
The first method mathematically demonstrated to exactly match the EU’s “ideal equation” — the probability-weighted best estimate of future cash flows — for finite, predictable risks, a result previously considered unattainable for insurance exposures.
Contract-level expected cash flows align directly with IFRS 17’s measurement model, producing consistent, auditable estimates for insurers and reinsurers reporting internationally.
For non-insurance entities — administrators, sellers, and obligors — revenue recognition follows expected cash flows by contract, automating alignment and reducing audit risk and administrative burden.
Read the paper
The KB Method was released publicly to invite peer scrutiny — reviewed by the Casualty Actuarial Society, then formally published in a peer-reviewed international journal.
The Kerper–Bowron Method: A Foundational Change for Service Contract Claim Estimation and Accounting
The formal publication of record. Introduces the Earned Contract formula, the probabilistic exposure base, and the demonstration of exact Solvency II equivalence. Risks 14(3), 44.
Read in RisksSSRN Working Paper
The publicly posted preprint, including the patent-pending disclosure (U.S. Provisional Patent Application No. 63/858,053) and the full technical development of the method.
Read on SSRNAn Exposure Based Approach to Automobile Warranty Ratemaking and Reserving
The original Kerper & Bowron paper published by the Casualty Actuarial Society — the exposure-based framework the KB Method extends to full contract-level accounting.
Cited in the 2026 paperCoverage and announcements
Birmingham firm rethinks warranty accounting
Alabama’s leading business publication profiles the firm and the method — from its 2003 origins above a dental office to a framework its creators hope becomes the industry standard.
Read the featureKB Method earns peer review and national media recognition
Announcing formal publication in Risks and growing momentum: administrators, financial institutions, and insurers coming aboard for 2026 implementations.
Read the releaseAnnouncing the Kerper Bowron Method
The launch announcement: a patent-pending method to transform service contract and extended warranty accounting for a $250 billion+ global industry.
Read the announcementTwo decades in the making
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2003
Kerper & Bowron founded
John Kerper, FSA, MAAA, and Lee Bowron, ACAS, MAAA, open the firm in Birmingham and begin developing exposure-based techniques for service contracts — starting with two components: exposure development and loss projection.
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2007
Foundation paper published by the CAS
“An Exposure Based Approach to Automobile Warranty Ratemaking and Reserving” appears in the Casualty Actuarial Society Forum, introducing the exposure-based framework the KB Method builds on.
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2025
Patent filed; CAS technical review completed
U.S. Provisional Patent Application No. 63/858,053 is filed and Irish Trinity LLC is formed to develop the intellectual property. The method completes a rigorous six-month technical review by the Casualty Actuarial Society with no methodological objections raised.
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Jan 2026
Public launch
The KB Method is announced publicly to encourage broad industry adoption and peer discussion, with the full technical paper submitted to Risks, an international peer-reviewed journal.
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Feb 2026
Peer-reviewed publication
The paper is accepted and published in Risks (MDPI) — the first formal academic validation of the approach.
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May 2026
National recognition; implementations underway
Featured in Business Alabama and announced via Business Wire as administrators, financial institutions, and insurance professionals move toward 2026 implementations.
Built for VSCs. Ready for every service contract.
The method applies to virtually all contracts covering repair, maintenance, or accidental damage — and its contract-level precision opens financial applications well beyond reserving.
Vehicle service contracts
The core application: precise claim and cancellation streams for VSC books, including constantly shifting mixes of term, mileage, and coverage.
Phones, appliances & home systems
Extends naturally to phone protection plans, appliance warranties, and home system coverage across the global market.
Lending & capital
Quantifying the gap between projected losses and required reserves with actuarial certainty unlocks compliant lending capital inside existing dealer-owned reinsurance structures.
Pricing & product development
Contract-level visibility feeds directly into sharper pricing, product design, and capital deployment decisions.
Cancellation forecasting
Accurate cancel liabilities and forecasts support better budgeting for dealers, administrators, and obligors.
Customer lifetime value
The same expected cash-flow stream extends to customer lifetime value analysis, as developed in the published paper.
Common questions
What is the KB Method in one sentence?
A patent-pending actuarial and accounting method that produces a precise, month-by-month stream of expected claim and cancellation payments for every individual service contract, using only point-of-sale data.
How is it different from traditional earning curves?
Earning curves apply one aggregate, backward-looking shape to an entire block of business. The KB Method builds the estimate from the bottom up — a probabilistic exposure base and Generalized Linear Models generate contract-specific projections that adapt to actual experience rather than industry averages.
What data does it require?
Only data captured at the point of sale — term, mileage, coverage, deductible, vehicle profile, price, and similar factors — plus the claim and cancellation experience that emerges over time. No consumer credit checks or changes in tax treatment are involved.
Which accounting and regulatory standards does it support?
The method aligns with Solvency II, IFRS 17, and ASC 606 simultaneously, and is the first method mathematically demonstrated to exactly match Solvency II’s ideal equation (Article 77) for finite, predictable risks.
Has the method been independently validated?
Yes. It completed a six-month technical review by the Casualty Actuarial Society with no methodological objections raised, and the full paper was peer-reviewed and published in Risks (MDPI) in 2026. A U.S. provisional patent application (No. 63/858,053) has been filed.
How does an engagement work?
You send your contract and claims data; we return the expected cash-flow stream for each service contract — ready for reserving, revenue recognition, lending analysis, and reporting. Request a demo below to see it on your own book.
See your book, contract by contract
Bring your contract and claims data and we’ll walk you through what the KB Method reveals — expected cash flows, reserve implications, and lending capacity, on your own portfolio.
kb@kerper-bowron.com · +1 (205) 588-4028 · Birmingham, AL
The Kerper Bowron Method is patent-pending (U.S. Provisional Patent Application No. 63/858,053). Intellectual property developed by Irish Trinity LLC. Developed by John Kerper, FSA, MAAA, and Lee Bowron, ACAS, MAAA.