Paid-Incurred Chain Reserving Method with Dependence Modeling
20 Pages Posted: 22 Aug 2011
Date Written: August 18, 2011
The paid-incurred chain (PIC) reserving method is a claims reserving method in general insurance that allows to combine claims payments and incurred losses information in a mathematical consistent way. The main criticism on the original Bayesian log-normal PIC model presented in Merz-Wuthrich [IME, 2010] is that it does not respect dependence properties within the observed data. In the present paper, we extend the original Bayesian log-normal PIC model so that dependence is modeled in an appropriate way.
Keywords: claims reserving, outstanding loss liabilities, ultimate loss prediction, claims payments, claims incurred, incurred losses, prediction uncertainty, paid-incurred chain model, PIC reserving method, general insurance, non-life insurance
JEL Classification: G22, G18, C11
Suggested Citation: Suggested Citation