Chain Ladder Bias

Greg Taylor

ASTIN Bulletin, 2003, vol. 33, issue 2, 313-330

Abstract: The chain ladder forecast of outstanding losses is known to be unbiased under suitable assumptions. According to these assumptions, claim payments in any cell of a payment triangle are dependent on those from preceding development years of the same accident year. If all cells are assumed stochastically independent, the forecast is no longer unbiased. Section 5 shows that, under rather general assumptions, it is biased upward. This result is linked to earlier work on some stochastic versions of the chain ladder.

Date: 2003
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