Modified Munich Chain-Ladder Method

20 Pages Posted: 30 Aug 2014

See all articles by Michael Merz

Michael Merz

University of Hamburg

Mario V. Wuthrich

RiskLab, ETH Zurich

Date Written: August 29, 2014

Abstract

The Munich chain-ladder reserving method was introduced on an axiomatic basis. We analyze these axioms and we define a modified Munich chain-ladder reserving method which is based on an explicit stochastic model. This stochastic model then allows to consider claims prediction and prediction uncertainty for the Munich chain-ladder reserving method in a consistent way.

Keywords: Munich chain-ladder method, claims reserving, prediction uncertainty, mean square error of prediction, multivariate Gaussian model, claims paid and claims incurred

JEL Classification: G22, G13, G18, G38, D46, C59

Suggested Citation

Merz, Michael and Wuthrich, Mario V., Modified Munich Chain-Ladder Method (August 29, 2014). Swiss Finance Institute Research Paper No. 14-65. Available at SSRN: https://ssrn.com/abstract=2489289 or http://dx.doi.org/10.2139/ssrn.2489289

Michael Merz

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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