Development Pattern and Prediction Error for the Stochastic Bornhuetter-Ferguson Claims Reserving Method

Annina Saluz, Alois Gisler and Mario V. Wüthrich

ASTIN Bulletin, 2011, vol. 41, issue 2, 279-313

Abstract: We investigate the question how the development pattern in the Bornhuetter-Ferguson method should be estimated and derive the corresponding conditional mean square error of prediction (MSEP) of the ultimate claim prediction. An estimator of this conditional MSEP in a distribution-free model was given by Mack [9], whereas in Alai et al. [2] this conditional MSEP was studied in an over-dispersed Poisson model using the chain ladder development pattern. First we consider distributional models and derive estimators (maximum likelihood) for the development pattern taking all relevant information into account. Moreover, we suggest new estimators of the correlation matrix of these estimators and new estimators of the conditional MSEP. Our findings supplement some of Mack's results. The methodology is illustrated at two numerical examples.

Date: 2011
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