Claims Development Result in the Paid-Incurred Chain Reserving Method

Posted: 17 Aug 2011 Last revised: 4 Jul 2012

See all articles by Sebastian Happ

Sebastian Happ

University of Hamburg

Michael Merz

University of Hamburg

Mario V. Wuthrich

RiskLab, ETH Zurich

Date Written: July 13, 2011

Abstract

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

Suggested Citation

Happ, Sebastian and Merz, Michael and Wuthrich, Mario V., Claims Development Result in the Paid-Incurred Chain Reserving Method (July 13, 2011). Insurance: Mathematics and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1911030 or http://dx.doi.org/10.2139/ssrn.1911030

Sebastian Happ

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Michael Merz

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Mario V. Wuthrich (Contact Author)

RiskLab, ETH Zurich ( email )

Department of Mathematics
Ramistrasse 101
Zurich, 8092
Switzerland

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