Individual loss reserving using paid–incurred data

Mathieu Pigeon, Katrien Antonio and Michel Denuit

Insurance: Mathematics and Economics, 2014, vol. 58, issue C, 121-131

Abstract: This paper develops a stochastic model for individual claims reserving using observed data on claim payments as well as incurred losses. We extend the approach of Pigeon et al. (2013), designed for payments only, towards the inclusion of incurred losses. We call the new technique the individual Paid and Incurred Chain (iPIC) reserving method. Analytic expressions are derived for the expected ultimate losses, given observed development patterns. The usefulness of this new model is illustrated with a portfolio of general liability insurance policies. For the case study developed in this paper, detailed comparisons with existing approaches reveal that iPIC method performs well and produces more accurate predictions.

Keywords: Stochastic loss reserving; General insurance; Multivariate Skew Normal distribution; Prediction; Chain-Ladder (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:58:y:2014:i:c:p:121-131

DOI: 10.1016/j.insmatheco.2014.06.012

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