Individual Loss Reserving with the Multivariate Skew Normal Framework

ASTIN Bulletin, 43(3), 399-428 (2013)

30 Pages Posted: 1 Feb 2012 Last revised: 17 May 2017

See all articles by Mathieu Pigeon

Mathieu Pigeon

Catholic University of Louvain (UCL)

Katrien Antonio

KU Leuven; University of Amsterdam

Michel Denuit

Catholic University of Louvain

Date Written: May 21, 2013

Abstract

In general insurance, the evaluation of future cash flows and solvency capital has become increasingly important. To assist in this process, the present paper proposes an individual discrete-time loss reserving model describing the occurrence, the reporting delay, the time to the first payment, and the cash flows associated with the settlement process of each individual claim. The approach uses development factors similar to those of the standard chain-ladder method. These are parametrically modeled by the Multivariate Skew Normal distribution. Empirical analyses using a realistic portfolio and out-of-sample prediction tests demonstrate the relevance of the model proposed.

Keywords: stochastic loss reserving, general insurance, multivariate skew normal distribution, chain-ladder

Suggested Citation

Pigeon, Mathieu and Antonio, Katrien and Denuit, Michel, Individual Loss Reserving with the Multivariate Skew Normal Framework (May 21, 2013). ASTIN Bulletin, 43(3), 399-428 (2013). Available at SSRN: https://ssrn.com/abstract=1996455 or http://dx.doi.org/10.2139/ssrn.1996455

Mathieu Pigeon

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Michel Denuit

Catholic University of Louvain ( email )

Place Montesquieu, 3
B-1348 Louvain-la-Neuve, 1348
Belgium

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