Claims Development Result in the Paid-Incurred Chain Reserving Method
Posted: 17 Aug 2011 Last revised: 4 Jul 2012
Date Written: July 13, 2011
We present the one-year claims development result (CDR) in the paid-incurred chain (PIC) reserving model. The PIC reserving model presented in Merz-Wuthrich is a Bayesian stochastic claims reserving model that considers simultaneously claims payments and incurred losses information and allows for deriving the full predictive distribution of the outstanding loss liabilities. In this model we study the conditional mean square error of prediction (MSEP) for the one-year CDR uncertainty, which is the crucial uncertainty view under Solvency II.
Keywords: stochastic claims reserving, PIC method, outstanding loss liabilities, claims payments, incurred losses, prediction uncertainty, conditional mean square error, claims development result, solvency
JEL Classification: G22, G18, C11
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