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 and the Birmingham Business Journal · Announced on Business Wire
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.
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 provide credible results to stakeholders, and structurally unable to satisfy modern accounting standards simultaneously.
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.
Term, mileage, coverage, deductible, vehicle profile, price, and additional factors — data every seller already captures.
A probabilistic exposure base for each month of the contract replaces the traditional expected-miles assumption.
Advanced statistical models produce expected claim and cancellation payments, month by month, contract by contract. Projected claims are also adjusted for trend, seasonality, and other factors.
Revenue, reserves, and liabilities follow directly from the projected cash-flow stream — and update as experience develops.
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.
The KB Method was released publicly to invite peer scrutiny, then formally published in a peer-reviewed international journal.
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 RisksThe 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 SSRNAlabama’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 featureAnnouncing formal publication in Risks and growing momentum: administrators, financial institutions, and insurers coming aboard for 2026 implementations.
Read the releaseBirmingham’s business weekly covers the patent-pending method and the firm behind it as momentum builds across the industry.
Read the storyJohn 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.
“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.
U.S. Provisional Patent Application No. 63/858,053 is filed, with related company Irish Trinity LLC developing the intellectual property.
The paper is accepted and published in Risks (MDPI) — the first formal academic validation of the approach.
Featured in Business Alabama and announced via Business Wire as administrators, financial institutions, and insurance professionals move toward 2026 implementations.
The Birmingham Business Journal covers the method as pilot-project evaluations with potential clients get underway.
The method applies to virtually all contracts covering repair, maintenance, or accidental damage — and its contract-level precision opens financial applications well beyond reserving.
The core application: precise claim and cancellation streams for VSC books, including constantly shifting mixes of term, mileage, and coverage.
Extends naturally to phone protection plans, appliance warranties, and home system coverage across the global market.
Quantifying the gap between projected losses and required reserves with actuarial certainty unlocks compliant lending capital inside existing dealer-owned reinsurance structures.
Contract-level visibility feeds directly into sharper pricing, product design, and capital deployment decisions.
Accurate cancel liabilities and forecasts support better budgeting for dealers, administrators, and obligors.
The same expected cash-flow stream extends to customer lifetime value analysis, as developed in the published paper.
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. This method has additional applications in collateralization and fundamentally changes how the service contract/manufacturer warranty is financially modeled, reserved, and capitalized.
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 advanced statistical models generate contract-specific projections that adapt to actual experience rather than industry averages.
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.
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. The method is also compliant with U.S. GAAP and NAIC standards.
Yes. 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.
We are evaluating potential clients for pilot projects. Request a demo for more information.
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.
