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Reversible jump Markov chain Monte Carlo method for parameter reduction in claims reserving

Verrall, R. J. and Wüthrich, M. V. (2012). Reversible jump Markov chain Monte Carlo method for parameter reduction in claims reserving. North American Actuarial Journal, 16(2), pp. 240-259. doi: 10.1080/10920277.2012.10590639

Abstract

We present an application of the reversible jump Markov chain Monte Carlo (RJMCMC) method to the important problem of setting claims reserves in general insurance business for the outstanding loss liabilities. A measure of the uncertainty in these claims reserves estimates is also needed for solvency purposes. The RJMCMC method described in this paper represents an improvement over the manual processes often employed in practice. In particular, our RJMCMC method describes parameter reduction and tail factor estimation in the claims reserving process, and, moreover, it provides the full predictive distribution of the outstanding loss liabilities.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published in North American Actuarial Journal on 26 Nov 2012, available online: http://www.tandfonline.com/10.1080/10920277.2012.10590639.
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Actuarial Science & Insurance
URI: http://openaccess.city.ac.uk/id/eprint/3802
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