Matrix calculation for ultimate and 1-year risk in the Semi-Markov individual loss reserving model

Carole Bettonville, Louise d'Oultremont, Michel Denuit (), Julien Trufin and Robin Van Oirbeek
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Michel Denuit: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2021017, LIDAM Reprints ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: This paper proposes a multistate model with a Semi-Markov dependence structure describing the different stages in the settlement process of individual claims in general insurance. Every trajectory, from reporting to closure is combined with a modeling of individual link ratios to obtain the ultimate cost of each claim. Analytical expressions are derived for the moments of ultimate amounts whereas quantile risk measures can be obtained by simulation. In the 1-year view, the proposed matrix calculations avoid the simulation-within-simulation issue and offer a tractable evaluation method. A case study illustrates the relevance of the proposed approach.

Keywords: IBNR; RBNP; RBNS; loss development; technical provisions; solvency calculation; financial reporting (search for similar items in EconPapers)
Date: 2021-01-01
Note: In: Scandinavian Actuarial Journal, Vol. 2021, no.5, p. 380-407 (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvar:2021017

DOI: 10.1080/03461238.2020.1848912

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