Predicting the Claims-Development-Result in the Chain-Ladder Method for Correlated Run-Off Portfolios

Zeitschrift für die gesamte Versicherungswissenschaft, Vol. 97, No. 4 (2008), 439-461, DOI: 10.1007/s12297-008-0035-5

Posted: 20 May 2012

See all articles by Jochen Heberle

Jochen Heberle

University of Hamburg

Luis Huergo

University of Tuebingen

Michael Merz

University of Hamburg

Date Written: October 21, 2008

Abstract

In the present paper we analyse how the estimators from Merz u. Wüthrich (2007) could be generalised to the case of N correlated run-off triangles. The simultaneous view on N correlated subportfolios is motivated by the fact, that in practice a run-off portfolio often has to be divided in subportfolios, so that the homogeneity assumption of the claims reserving method on each subportfolio is satisfied. We derive an explicit formula for the process-variance, the estimation-error and the prediction error made by the forecast for the claims development result with the Chain-Ladder method. We illustrate the results by an example.

Keywords: Chain-Ladder, claims reserving, general insurance, non-life insurance, claims development result

JEL Classification: C10, G22

Suggested Citation

Heberle, Jochen and Huergo, Luis and Merz, Michael, Predicting the Claims-Development-Result in the Chain-Ladder Method for Correlated Run-Off Portfolios (October 21, 2008). Zeitschrift für die gesamte Versicherungswissenschaft, Vol. 97, No. 4 (2008), 439-461, DOI: 10.1007/s12297-008-0035-5 , Available at SSRN: https://ssrn.com/abstract=2056826

Jochen Heberle (Contact Author)

University of Hamburg ( email )

Von-Melle-Park 5
Hamburg, 20146
Germany

Luis Huergo

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

Michael Merz

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

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