One-year reserve risk including a tail factor: closed formula and bootstrap approaches

Alexandre Boumezoued, Yoboua Angoua, Laurent Devineau and Jean-Philippe Boisseau
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Alexandre Boumezoued: SAF
Yoboua Angoua: SAF
Laurent Devineau: SAF

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Abstract: In this paper, we detail the main simulation methods used in practice to measure one-year reserve risk, and describe the bootstrap method providing an empirical distribution of the Claims Development Result (CDR) whose variance is identical to the closed-form expression of the prediction error proposed by W\"uthrich et al. (2008). In particular, we integrate the stochastic modeling of a tail factor in the bootstrap procedure. We demonstrate the equivalence with existing analytical results and develop closed-form expressions for the error of prediction including a tail factor. A numerical example is given at the end of this study.

Date: 2011-07, Revised 2012-04
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1107.0164

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