Model Uncertainty in Claims Reserving within Tweedie's Compound Poisson Models

ASTIN Bulletin 39(1), pp.1-33, 2009

Posted: 23 Nov 2014

See all articles by Gareth Peters

Gareth Peters

Department of Actuarial Mathematics and Statistics, Heriot-Watt University; University College London - Department of Statistical Science; University of Oxford - Oxford-Man Institute of Quantitative Finance; London School of Economics & Political Science (LSE) - Systemic Risk Centre; University of New South Wales (UNSW) - Faculty of Science

Pavel V. Shevchenko

Macquarie University; Macquarie University, Macquarie Business School

Mario V. Wuthrich

RiskLab, ETH Zurich

Date Written: October 13, 2008

Abstract

In this paper we examine the claims reserving problem using Tweedie's compound Poisson model. We develop the maximum likelihood and Bayesian Markov chain Monte Carlo simulation approaches to fit the model and then compare the estimated models under different scenarios. The key point we demonstrate relates to the comparison of reserving quantities with and without model uncertainty incorporated into the prediction. We consider both the model selection problem and the model averaging solutions for the predicted reserves. As a part of this process we also consider the sub problem of variable selection to obtain a parsimonious representation of the model being fitted.

Keywords: Claims reserving, model uncertainty, Tweedie's compound Poisson model, Bayesian analysis, model selection, model averaging, Markov chain Monte Carlo

JEL Classification: C00, G00

Suggested Citation

Peters, Gareth and Shevchenko, Pavel V. and Wuthrich, Mario V., Model Uncertainty in Claims Reserving within Tweedie's Compound Poisson Models (October 13, 2008). ASTIN Bulletin 39(1), pp.1-33, 2009. Available at SSRN: https://ssrn.com/abstract=2529598

Gareth Peters

Department of Actuarial Mathematics and Statistics, Heriot-Watt University ( email )

Edinburgh Campus
Edinburgh, EH14 4AS
United Kingdom

HOME PAGE: http://garethpeters78.wixsite.com/garethwpeters

University College London - Department of Statistical Science ( email )

1-19 Torrington Place
London, WC1 7HB
United Kingdom

University of Oxford - Oxford-Man Institute of Quantitative Finance ( email )

University of Oxford Eagle House
Walton Well Road
Oxford, OX2 6ED
United Kingdom

London School of Economics & Political Science (LSE) - Systemic Risk Centre ( email )

Houghton St
London
United Kingdom

University of New South Wales (UNSW) - Faculty of Science ( email )

Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Mario V. Wuthrich

RiskLab, ETH Zurich ( email )

Department of Mathematics
Ramistrasse 101
Zurich, 8092
Switzerland

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