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INDIVIDUAL LOSS RESERVING WITH THE MULTIVARIATE SKEW NORMAL FRAMEWORK

Mathieu Pigeon, Katrien Antonio and Michel Denuit

ASTIN Bulletin, 2013, vol. 43, issue 3, 399-428

Abstract: 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.

Date: 2013
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Citations: View citations in EconPapers (26)

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Working Paper: Individual Loss Reserving with the Multivariate Skew Normal Framework (2013)
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