 ACTUARIAL ESTIMATION OF TECHNICAL RESERVES IN INSURANCE COMPANIES. BASIC CHAIN LADDER METHODCorneliu Cristian Bente ()
Annals of Faculty of Economics, 2017, vol. 1, issue 1, 227-234 Abstract: A major concern for insurance companies is to keep achieving financial stability of the insurance business which it carries. They must work in order to fully cover the expense of premiums collected, assumed obligations to policyholders. Otherwise, get in position to not fulfil these obligations due to insufficient insurance reserves established. Unfavourable balance emerged between the compensation, due first, to be covered from other resources. If this state of balance is maintained and becomes an alarming extent, the insurer may get unable to pay. To avoid such a situation there is required the insurer to accurately determine the level of insurance premiums to collect from insurers, and technical reserves required to fulfil. But is this is the case in reality? To estimate the total reserves to be made for the entire portfolio of damage unsettled can be used several methods including The Chain Ladder Method. This paper, is about the results of applying The Chain Ladder Method in insurance companies and also about the limits of it. The validation process applies to both the quantitative and the qualitative is not limited to the comparison between estimates and results. It should include qualitative aspects such as evaluation mechanisms control, documentation, interpretation and communication of results. This method is used by insurers to predict the amount of reserves to be established to cover future damage. This actuarial method is one of the most used for grounding reserves. The method is based on the assumption that existing patterns of claims in the past will continue in the future. As this assumption to be valid the data should be accurate in the past. But several factors can affect the accuracy of data, including changes in insurance products offered, changes in legislation, many times with claims for compensation, or changes in the approval process of compensation for damages. Insurance companies must maintain a share premium of the insurance premiums to pay claims that may arise in the future. Keywords: claims; chain-ladder method; damages; premium rates. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ora:journl:v:1:y:2017:i:1:p:227-234 Access Statistics for this article More articles in Annals of Faculty of Economics from University of Oradea, Faculty of Economics Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.