A COLLECTIVE RESERVING MODEL WITH CLAIM OPENNESS. Issue 1 (3rd January 2022)

• Record Type: Journal Article
• Authors: Lindholm, Mathias; Zakrisson, Henning
• Is Part Of: ASTIN bulletin. Volume 52:Issue 1(2022)
• Page Start: 117
• Page End: 143
• Publication Date: 2022-01-03
• Subjects: Aggregated reserving -- open claim dynamics -- RBNS and IBNR reserves; Insurance -- Mathematics -- Periodicals; Risk (Insurance) -- Mathematics -- Periodicals; 368.01
• DOI: 10.1017/asb.2021.33
• Languages: English
• ISSNs: 0515-0361

Abstract

Abstract: The present paper introduces a simple aggregated reserving model based on claim count and payment dynamics, which allows for claim closings and re-openings. The modelling starts off from individual Poisson process claim dynamics in discrete time, keeping track of accident year, reporting year and payment delay. This modelling approach is closely related to the one underpinning the so-called double chain-ladder model, and it allows for producing separate reported but not settled and incurred but not reported reserves. Even though the introduction of claim closings and re-openings will produce new types of dependencies, it is possible to use flexible parametrisations in terms of, for example, generalised linear models (GLM) whose parameters can be estimated based on aggregated data using quasi-likelihood theory. Moreover, it is possible to obtain interpretable and explicit moment calculations, as well as having consistency of normalised reserves when the number of contracts tend to infinity. Further, by having access to simple analytic expressions for moments, it is computationally cheap to bootstrap the mean squared error of prediction for reserves. The performance of the model is illustrated using a flexible GLM parametrisation evaluated on non-trivial simulated claims data. This numerical illustration indicates a clear improvement compared with models not taking claim closings and re-openings into account. The results are also seen to be of comparable quality with machine learning models for aggregated data not taking claim openness into account.