Claims Run-Off Uncertainty: The Full Picture

Michael Merz and Mario V. Wuthrich
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Michael Merz: University of Hamburg
Mario V. Wuthrich: RiskLab, ETH Zurich

No 14-69, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: The aim of this contribution is to revisit, clarify and complete the picture of uncertainty estimates in the chain-ladder (CL) claims reserving method. Therefore, we consider the conditional mean square error of prediction (MSEP) of the total prediction uncertainty (using Mack’s formula) and the one of the one-year prediction uncertainty (using the Merz-Wüthrich formula). We discuss and compare these two formulas and we derive the missing pieces that close the gap between the one-year and total run-off uncertainty view.

Keywords: Claims reserving; chain-ladder method; gamma-gamma Bayesian chain-ladder model; conditional mean square error of prediction; claims development result; one-year uncertainty; run-off uncertainty; Mack’s formula; Merz- Wüthrich formula; risk margin; R package ChainLadder (search for similar items in EconPapers)
JEL-codes: D46 G22 G28 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2014-11
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1469

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