The evaluation of future cash flows and solvency capital recently gained importance in general insurance. To assist in this process, our paper proposes a novel loss reserving model, designed for individual claims developing in discrete time. We model the occurrence of claims, as well as their reporting delay, the time to the first payment, and the cash flows in the development process. Our approach uses development factors similar to those of the well-known chain–ladder method. We suggest the Multivariate Skew Normal distribution as a multivariate distribution suitable for modeling these development factors. Empirical analysis using a real portfolio and out-of-sample prediction tests demonstrate the relevance of the model proposed.

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In this paper, the individual claim reserving model proposed by Pigeon et al. (2013) is extended to include paid and incurred data. Analytic expressions are derived for the expected ultimate losses, given observed development patterns. The usefulness of this new model is illustrated using a portfolio of general liability insurance policies. Detailed comparisons with existing approaches reveal that the paid-incurred individual reserving method proposed in this paper performs well and produces more accurate predictions.

The European Commission has introduced new risk management tools in the rural development pillar 2 of the Common Agricultural Policy. One of them consists in providing co-financing support to mutual funds compensating farmers who experience a severe drop in their income. This paper analyses this income stabilisation tool for a region in Belgium by means of a skew normal linear mixed model. Relying on the farm accountancy data network, this analysis focuses on estimating the probability that such a fund would need to intervene and, in that case, the expected amount of each farm income compensation. The predictive distribution of future incomes given past revenues trajectory is derived and used for evaluation purposes. Particular attention is paid to additional requirements that could be imposed to the income stabilisation tool.