Modified Munich Chain-Ladder Method

Merz, Michael; Wüthrich, Mario V.

doi:10.3390/risks3040624

Cited by 2 publications

(1 citation statement)

References 6 publications

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“…We follow Mack (1993), Wüthrich and Merz (2008a, 2008b, 2015 and England et al (2019), where we refer the reader for details. There is also an extensive literature on other aspects of applications of Chain Ladder method in claims reserving; see, e.g., Reference Buchwalder et al (2006), Merz and Wüthrich (2015) and Harnau (2018), Peremans et al (2018).…”

Section: Foundations Of Reserve Risk Modellingmentioning

confidence: 99%

One-Year and Ultimate Reserve Risk in Mack Chain Ladder Model

Szatkowski

Delong

2021

Risks

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We investigate the relation between one-year reserve risk and ultimate reserve risk in Mack Chain Ladder model in a simulation study. The first goal is to validate the so-called linear emergence pattern formula, which maps the ultimate loss to the one-year loss, in case when we measure the risks with Value-at-Risk. The second goal is to estimate the true emergence pattern of the ultimate loss, i.e., the conditional distribution of the one-year loss given the ultimate loss, from which we can properly derive a risk measure for the one-year horizon from the simulations of ultimate losses. Finally, our third goal is to test if classical actuarial distributions can be used for modelling of the outstanding loss from the ultimate and the one-year perspective. In our simulation study, we investigate several synthetic loss triangles with various duration of the claims development process, volatility, skewness, and distributional assumptions of the individual development factors. We quantify the reserve risks without and with the estimation error of the claims development factors.

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