A Markov Model for Loss Reserving

Ole Hesselager

ASTIN Bulletin, 1994, vol. 24, issue 2, 183-193

Abstract: The claims generating process for a non-life insurance portfolio is modelled as a marked Poisson process, where the mark associated with an incurred claim describes the development of that claim until final settlement. An unsettled claim is at any point in time assigned to a state in some state-space, and the transitions between different states are assumed to be governed by a Markovian law. All claims payments are assumed to occur at the time of transition between states. We develop separate expressions for the IBNR and RBNS reserves, and the corresponding prediction errors.

Date: 1994
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