City Research Online

Cash flow generalisations of non-life insurance expert systems estimating outstanding liabilities

Haibu, M., Margraf, C., Miranda, M. D. M. & Nielsen, J. P. (2016). Cash flow generalisations of non-life insurance expert systems estimating outstanding liabilities. Expert Systems with Applications, 45, pp. 400-409. doi: 10.1016/j.eswa.2015.09.021


For as long as anyone remembers non-life insurance companies have used the so called chain ladder method to reserve for outstanding liabilities. When historical payments of claims are used as observations then chain ladder can be understood as estimating a multiplicative model. In most non-life insurance companies a mixture of paid data and expert knowledge, incurred data, is used as observations instead of just payments. This paper considers recent statistical cash flow models for asset-liability hedging, capital allocation and other management decision tools, and develops two new such methods incorporating available incurred data expert knowledge into the outstanding liability cash flow model. These two new methods unbundle the incurred data to aggregates of estimates of the future cash flow. By a re-distribution to the right algorithm, the estimated future cash flow is incorporated in the overall estimation process and considered as data. A statistical validation technique is developed for these two new methods and they are compared to the other recent cash flow methods. The two methods show to have a very good performance on the real-life data set considered.

Publication Type: Article
Additional Information: © 2015, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Publisher Keywords: Stochastic Reserving; General Insurance; Chain Ladder; Claims Inflation; Incurred Data; Model Validation
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Actuarial Science & Insurance
SWORD Depositor:
[thumbnail of ExpertsSystems_16_9_2015.pdf]
Text - Accepted Version
Available under License : See the attached licence file.

Download (283kB) | Preview
[thumbnail of Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence]
Text (Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence) - Other
Download (201kB) | Preview


Add to AnyAdd to TwitterAdd to FacebookAdd to LinkedinAdd to PinterestAdd to Email


Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login