Bornhuetter-Ferguson Reserving Method with Repricing

31 Pages Posted: 5 Dec 2015

See all articles by Annina Saluz

Annina Saluz

ETH Zürich - Department of Mathematics

Hans Bühlmann

ETH Zürich - Department of Mathematics

Alois Gisler

D-MATH, RiskLab

Franco Moriconi

University of Perugia - Department of Economics

Date Written: March 17, 2014

Abstract

The Bornhuetter-Ferguson (BF) reserve of an accident year is the product of an a priori estimate of the expected ultimate claim and the estimated 'still to come percentage'. In practice, these a priori estimates are often adjusted over time. We call this process 'repricing'. In this paper we study the incorporation of claims experience for the repricing process by using credibility theory. We simultaneously estimate the still to come percentages and we quantify the prediction uncertainty of the resulting reserves. In a special case the method can be interpreted as a weighted average between chain ladder (CL) and BF.

Keywords: Claims Reserving, Bornhuetter-Ferguson Method, Credibility Theory, Repricing

JEL Classification: G22

Suggested Citation

Saluz, Annina and Bühlmann, Hans and Gisler, Alois and Moriconi, Franco, Bornhuetter-Ferguson Reserving Method with Repricing (March 17, 2014). Available at SSRN: https://ssrn.com/abstract=2697167 or http://dx.doi.org/10.2139/ssrn.2697167

Annina Saluz (Contact Author)

ETH Zürich - Department of Mathematics ( email )

R¨amistrasse 101
Raemistr. 101
Z¨urich, 8092
Switzerland

Hans Bühlmann

ETH Zürich - Department of Mathematics ( email )

Raemistrasse 101
Zurich, 8092
Switzerland

Alois Gisler

D-MATH, RiskLab ( email )

ETH Zurich
Raemistrasse 101
Zurich, 8092
Switzerland

Franco Moriconi

University of Perugia - Department of Economics ( email )

via Pascoli, 20
Perugia, 06123
Italy

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