Title: A robustification of the chain-ladder method
Authors: Verdonck, Tim ×
Van Wouwe, Martine
Dhaene, Jan #
Issue Date: 2009
Series Title: North American Actuarial Journal vol:13 issue:2 pages:280-298
Abstract: In a non–life insurance business an insurer often needs to build up a reserve to able to meet his or her future obligations arising from incurred but not reported completely claims. To forecast these claims reserves, a simple but generally accepted algorithm is the classical chain-ladder method. Recent research essentially focused on the underlying model for the claims reserves to come to appropriate bounds for the estimates of future claims reserves. Our research concentrates on scenarios with outlying data. On closer examination it is demonstrated that the forecasts for future claims reserves are very dependent on outlying observations. The paper focuses on two
approaches to robustify the chain-ladder method: the first method detects and adjusts the outlying values, whereas the second method is based on a robust generalized linear model technique. In this way insurers will be able to find a reserve that is similar to the reserve they would have
found if the data contained no outliers. Because the robust method flags the outliers, it is possible to examine these observations for further examination. For obtaining the corresponding standard errors the bootstrapping technique is applied. The robust chain-ladder method is applied to several run-off triangles with and without outliers, showing its excellent performance.
ISSN: 1092-0277
VABB publication type: VABB-1
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center Insurance, Leuven
Statistics Section
× corresponding author
# (joint) last author

Files in This Item:
File Description Status SizeFormat
naaj-2009-vol13-no2-dhaene[1].pdfMain article Published 262KbAdobe PDFView/Open


All items in Lirias are protected by copyright, with all rights reserved.