Reserving by Conditioning on Markers of Individual Claims: A Case Study Using Historical Simulation

Els Godecharle and Katrien Antonio

North American Actuarial Journal, 2015, vol. 19, issue 4, 273-288

Abstract: This article explores the use of claim specific characteristics, so-called claim markers, for loss reserving with individual claims. Starting from the approach of Rosenlund and using the technique of historical simulation we develop a stochastic Reserve by Detailed Conditioning method that is applicable to a microlevel data set with detailed information on individual claims. We construct the predictive distribution of the outstanding loss reserve by simulating future payments of a claim, given its claim markers. We demonstrate the performance of the method on a portfolio of general liability insurance policies for private individuals from a European insurance company. Hereby we explore how to incorporate different kinds of claim markers and evaluate the impact of the set of markers and their specification on the predictive distribution of the outstanding reserve.

Date: 2015
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DOI: 10.1080/10920277.2015.1046607

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