Bootstrap Estimation of the Predictive Distributions of Reserves Using Paid and Incurred Claims

Liu, H. & Verrall, R. J. (2010). Bootstrap Estimation of the Predictive Distributions of Reserves Using Paid and Incurred Claims. Variance, 4, pp. 121-135.

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Abstract

This paper presents a bootstrap approach to estimate the prediction distributions of reserves produced by the Munich chain ladder (MCL) model. The MCL model was introduced by Quarg and Mack (2004) and takes into account both paid and incurred claims information. In order to produce bootstrap distributions, this paper addresses the application of bootstrapping methods to dependent data, with the consequence that correlations are considered. Numerical examples are provided to illustrate the algorithm and the prediction errors are compared for the new bootstrapping method applied to MCL and a more standard bootstrapping method applied to the chain-ladder technique.

Item Type: Article
Uncontrolled Keywords: Bootstrap, Munich chain ladder, Correlation, Simulation
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Actuarial Science & Insurance
URI: http://openaccess.city.ac.uk/id/eprint/3845

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