The Skewness of Bornhuetter-Ferguson
13 Pages Posted: 27 Nov 2018
Date Written: November 5, 2018
The Bornhuetter-Ferguson method belongs to the most popular method used to project non-life paid or incurred triangles. For this method, T. Mack (2008) developed a stochastic model allowing the estimation of the prediction error resulting from such projections. Based on this proposed stochastic model, this article provides a first approach for the estimation of the third moment, i.e. the skewness, of the resulting reserving distribution. The third moment is a useful information in the context of IFRS 17 where the quantile corresponding to the addition of a risk margin on top of the best estimate will have to be disclosed. In order to apply the proposed method, a few numerical examples are provided.
Keywords: Bornhuetter-Ferguson, Prediction error, Skewness, Reserving distribution, Stochastic claims reserving, IFRS 17
JEL Classification: C40, G22
Suggested Citation: Suggested Citation