Full Bayesian Analysis of Claims Reserving Uncertainty

20 Pages Posted: 24 May 2016

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

Rodrigo Targino

Getulio Vargas Foundation (FGV) - EMAp - School of Applied Mathematics

Mario V. Wuthrich

RiskLab, ETH Zurich

Date Written: May 20, 2016

Abstract

We revisit the gamma-gamma Bayesian chain-ladder (BCL) model for claims reserving in non-life insurance. This claims reserving model is usually used in an empirical Bayesian way using plug-in estimates for variance parameters, because this empirical Bayesian framework allows us for closed form solutions. The main purpose of this paper is to develop the full Bayesian case also considering prior distributions for variance parameters, and to study the resulting sensitivities.

Keywords: Chain-Ladder Method, Claims Reserving Uncertainty, Claims Development Result, Mack's Formula, Merz-WüThrich's Formula, Conditional Mean Square Error of Prediction, Runoff Uncertainty, Full Bayesian Chain-Ladder Model

JEL Classification: G22

Suggested Citation

Peters, Gareth and Targino, Rodrigo and Wuthrich, Mario V., Full Bayesian Analysis of Claims Reserving Uncertainty (May 20, 2016). Available at SSRN: https://ssrn.com/abstract=2783223 or http://dx.doi.org/10.2139/ssrn.2783223

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

Rodrigo Targino

Getulio Vargas Foundation (FGV) - EMAp - School of Applied Mathematics ( email )

Praia de Botafogo
Rio de Janeiro, 22250-900
Brazil

HOME PAGE: http://https://sites.google.com/site/rodrigodossantostargino/

Mario V. Wuthrich (Contact Author)

RiskLab, ETH Zurich ( email )

Department of Mathematics
Ramistrasse 101
Zurich, 8092
Switzerland

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