Back-Testing the Chain-Ladder Method

29 Pages Posted: 31 Jul 2018

See all articles by Andrea Gabrielli

Andrea Gabrielli

ETH Zurich, Department of Mathematics, RiskLab, Students

Mario V. Wuthrich

RiskLab, ETH Zurich

Date Written: July 9, 2018

Abstract

The chain-ladder method is one of the most popular claims reserving techniques. The aim of this study is to back-test the chain-ladder method. Therefore, we use a stochastic scenario generator which allows us to simulate arbitrarily many upper claims reserving triangles of similar characteristics for which we also know the corresponding lower triangles. Based on these simulated triangles we analyse the performance of the chain-ladder claims reserving method.

Keywords: chain-ladder, individual claims history simulation machine, claims reserving, loss reserving, back-testing, portfolio size, reserve uncertainty

JEL Classification: G22

Suggested Citation

Gabrielli, Andrea and Wuthrich, Mario V., Back-Testing the Chain-Ladder Method (July 9, 2018). Available at SSRN: https://ssrn.com/abstract=3211107 or http://dx.doi.org/10.2139/ssrn.3211107

Andrea Gabrielli

ETH Zurich, Department of Mathematics, RiskLab, Students ( email )

Switzerland

Mario V. Wuthrich (Contact Author)

RiskLab, ETH Zurich ( email )

Department of Mathematics
Ramistrasse 101
Zurich, 8092
Switzerland

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