Prediction error in the chain ladder method

Mario V. Wüthrich

Insurance: Mathematics and Economics, 2008, vol. 42, issue 1, 378-388

Abstract: We define a chain ladder model which allows for the study of three different error types: (a) diversifiable process error, (b) non-diversifiable process error, and (c) parameter estimation error. The model is based on the classical stochastic chain ladder model introduced by Mack [Mack, T., 1993. Distribution-free calculation of the standard error of chain ladder reserve estimates. Astin Bull. 23(2), 213-225]. In order to clearly distinguish the different sources of prediction uncertainty, we have to slightly modify that classical chain ladder model.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:42:y:2008:i:1:p:378-388

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