Calculating Insurance Claim Reserves with an Intuitionistic Fuzzy Chain-Ladder Method

Jorge De Andrés-Sánchez ()
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Jorge De Andrés-Sánchez: Social and Business Research Laboratory, Universitat Rovira i Virgili, Campus de Bellissens, 43204 Reus, Spain

Mathematics, 2024, vol. 12, issue 6, 1-24

Abstract: Estimating loss reserves is a crucial activity for non-life insurance companies. It involves adjusting the expected evolution of claims over different periods of active policies and their fluctuations. The chain-ladder (CL) technique is recognized as one of the most effective methods for calculating claim reserves in this context. It has become a benchmark within the insurance sector for predicting loss reserves and has been adapted to estimate variability margins. This variability has been addressed through both stochastic and possibilistic analyses. This study adopts the latter approach, proposing the use of the CL framework combined with intuitionistic fuzzy numbers (IFNs). While modeling with fuzzy numbers (FNs) introduces only epistemic uncertainty, employing IFNs allows for the representation of bipolar data regarding the feasible and infeasible values of loss reserves. In short, this paper presents an extension of the chain-ladder technique that estimates the parameters governing claim development through intuitionistic fuzzy regression, such as symmetric triangular IFNs. Additionally, it compares the results obtained with this method with those derived from the stochastic chain ladder by England and Verrall.

Keywords: loss reserving; chain ladder; probability–possibility transformation; intuitionistic fuzzy numbers; symmetric triangular intuitionistic fuzzy numbers; intuitionistic fuzzy regression (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2024
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