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A multivariate evolutionary generalised linear model framework with adaptive estimation for claims reserving

Benjamin Avanzi, Gregory Clive Taylor, Phuong Anh Vu and Bernard Wong

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Abstract: In this paper, we develop a multivariate evolutionary generalised linear model (GLM) framework for claims reserving, which allows for dynamic features of claims activity in conjunction with dependency across business lines to accurately assess claims reserves. We extend the traditional GLM reserving framework on two fronts: GLM fixed factors are allowed to evolve in a recursive manner, and dependence is incorporated in the specification of these factors using a common shock approach. We consider factors that evolve across accident years in conjunction with factors that evolve across calendar years. This two-dimensional evolution of factors is unconventional as a traditional evolutionary model typically considers the evolution in one single time dimension. This creates challenges for the estimation process, which we tackle in this paper. We develop the formulation of a particle filtering algorithm with parameter learning procedure. This is an adaptive estimation approach which updates evolving factors of the framework recursively over time. We implement and illustrate our model with a simulated data set, as well as a set of real data from a Canadian insurer.

Date: 2020-04
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Published in Insurance: Mathematics and Economics, Volume 93, July 2020, Pages 50-71

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Handle: RePEc:arx:papers:2004.06880