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Double chain ladder, claims development inflation and zero-claims

Martinez-Miranda, M. D., Nielsen, J. P., Verrall, R. J. and Wüthrich, M. V. (2015). Double chain ladder, claims development inflation and zero-claims. Scandinavian Actuarial Journal, 2015(5), pp. 383-405. doi: 10.1080/03461238.2013.823459

Abstract

Double chain ladder demonstrated how the classical chain ladder technique can be broken down into separate components. It was shown that under certain model assumptions and via one particular estimation technique, it is possible to interpret the classical chain ladder method as a model of the observed number of counts with a built-in delay function from when a claim is reported until it is paid. In this paper, we investigate the double chain ladder model further and consider the case when other knowledge is available, focusing on two specific types of prior knowledge, namely prior knowledge on the number of zero-claims for each underwriting year and prior knowledge about the relationship between the development of the claim and its mean severity. Both types of prior knowledge readily lend themselves to be included in the double chain ladder framework.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published online by Taylor & Francis in Scandinavian Actuarial Journal on 19/08/2013, available online: http://www.tandfonline.com/10.1080/03461238.2013.823459.
Publisher Keywords: prior knowledge, claims reserves, reserve risk, over-dispersed poisson model, cash flow, bootstrap
Subjects: H Social Sciences > HA Statistics
Departments: Cass Business School > Actuarial Science & Insurance
URI: http://openaccess.city.ac.uk/id/eprint/17077
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