One-year reserve risk including a tail factor: closed formula and bootstrap approaches

Alexandre Boumezoued (), Yoboua Angoua (), Laurent Devineau () and Jean-Philippe Boisseau ()
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Alexandre Boumezoued: R&D, Milliman, Paris - Milliman France
Yoboua Angoua: R&D, Milliman, Paris - Milliman France
Laurent Devineau: R&D Milliman - Milliman France, LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Jean-Philippe Boisseau: R&D, Milliman, Paris - Milliman France

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Abstract: In this paper, we detail the main simulation methods used in practice to measure one-year reserve risk, and describe the bootstrap method providing an empirical distribution of the Claims Development Result (CDR) whose variance is identical to the closed-form expression of the prediction error proposed by Wüthrich et al. (2008). In particular, we integrate the stochastic modeling of a tail factor in the bootstrap procedure. We demonstrate the equivalence with existing analytical results and develop closed-form expressions for the error of prediction including a tail factor. A numerical example is given at the end of this study.

Keywords: Non‐life insurance; Reserve risk; Claims Development Result; Bootstrap method; Tail factor; Prediction error; Solvency II (search for similar items in EconPapers)
Date: 2011-07-01
New Economics Papers: this item is included in nep-ias and nep-rmg
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