The Skewness of Bornhuetter-Ferguson

13 Pages Posted: 27 Nov 2018

See all articles by Eric Dal Moro

Eric Dal Moro

SCOR Global P&C SE Reinsurance (Zurich Branch)

Date Written: November 5, 2018

Abstract

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

Dal Moro, Eric, The Skewness of Bornhuetter-Ferguson (November 5, 2018). Available at SSRN: https://ssrn.com/abstract=3278497 or http://dx.doi.org/10.2139/ssrn.3278497

Eric Dal Moro (Contact Author)

SCOR Global P&C SE Reinsurance (Zurich Branch) ( email )

Zurich
Switzerland

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