Reserving by Conditioning on Markers of Individual Claims: A Case-Study Using Historical Simulation

North American Actuarial Journal, 2015, 19(4), 273-288

21 Pages Posted: 10 Jul 2014 Last revised: 17 May 2017

See all articles by Els Godecharle

Els Godecharle

KU Leuven - Department of Applied Economics

Katrien Antonio

KU Leuven; University of Amsterdam

Date Written: April 16, 2015

Abstract

This paper explores the use of claim specific characteristics, so-called claim markers, for loss reserving with individual claims. Starting from the approach of Rosenlund (2012) we develop a stochastic Reserve by Detailed Conditioning ('RDC') method which is applicable to a micro-level data set with detailed information on individual claims. We use historical simulation to construct the predictive distribution of the outstanding loss reserve by simulating payments of a claim, given its claim markers. We explore how to incorporate different types of claim specific information when simulating outstanding loss reserves, and evaluate the impact of the set of markers and their specification on the predictive distribution of the outstanding reserve. We demonstrate the performance of the method on a portfolio of general liability insurance policies for private individuals from a European insurance company.

Keywords: claims reserving, micro-level loss reserving, claim characteristics, historical simulation

Suggested Citation

Godecharle, Els and Antonio, Katrien, Reserving by Conditioning on Markers of Individual Claims: A Case-Study Using Historical Simulation (April 16, 2015). North American Actuarial Journal, 2015, 19(4), 273-288. Available at SSRN: https://ssrn.com/abstract=2464042 or http://dx.doi.org/10.2139/ssrn.2464042

Els Godecharle (Contact Author)

KU Leuven - Department of Applied Economics ( email )

Leuven, B-3000
BELGIUM

Katrien Antonio

KU Leuven ( email )

Leuven, Vlaams-Brabant

HOME PAGE: http://www.econ.kuleuven.be/katrien.antonio

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

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