Paid-Incurred Chain Reserving Method with Dependence Modeling

20 Pages Posted: 22 Aug 2011

Date Written: August 18, 2011

Abstract

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

Happ, Sebastian and Wuthrich, Mario V., Paid-Incurred Chain Reserving Method with Dependence Modeling (August 18, 2011). Available at SSRN: https://ssrn.com/abstract=1914151 or http://dx.doi.org/10.2139/ssrn.1914151

Sebastian Happ

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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