A GAMMA MOVING AVERAGE PROCESS FOR MODELLING DEPENDENCE ACROSS DEVELOPMENT YEARS IN RUN-OFF TRIANGLES

Luis E. Nieto-Barajas and Rodrigo Targino

ASTIN Bulletin, 2021, vol. 51, issue 1, 245-266

Abstract: We propose a stochastic model for claims reserving that captures dependence along development years within a single triangle. This dependence is based on a gamma process with a moving average form of order $p \ge 0$ which is achieved through the use of poisson latent variables. We carry out Bayesian inference on model parameters and borrow strength across several triangles, coming from different lines of businesses or companies, through the use of hierarchical priors. We carry out a simulation study as well as a real data analysis. Results show that reserve estimates, for the real data set studied, are more accurate with our gamma dependence model as compared to the benchmark over-dispersed poisson that assumes independence.

Date: 2021
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