Accounting Year Effects Modeling in the Stochastic Chain Ladder Reserving Method

Mario Wüthrich

North American Actuarial Journal, 2010, vol. 14, issue 2, 235-255

Abstract: In almost all stochastic claims reserving models one assumes that accident years are independent. In practice this assumption is violated most of the time. Typical examples are claims inflation and accounting year effects that influence all accident years simultaneously. We study a Bayesian chain ladder model that allows for accounting (calendar) year effects modeling. A case study of a general liability dataset shows that such accounting year effects contribute substantially to the prediction uncertainty and therefore need a careful treatment within a risk management and solvency framework.

Date: 2010
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DOI: 10.1080/10920277.2010.10597587

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