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Back-testing the chain-ladder method

Published online by Cambridge University Press:  13 November 2018

Andrea Gabrielli  and
Mario V. Wüthrich
Andrea Gabrielli*
Affiliation:
ETH Zurich, RiskLab, Department of Mathematics, 8092Zurich, Switzerland
Mario V. Wüthrich
Affiliation:
ETH Zurich, RiskLab, Department of Mathematics, 8092Zurich, Switzerland
*
*Correspondence to: Andrea Gabrielli, ETH Zurich, RiskLab, Department of Mathematics, 8092 Zurich, Switzerland. E-mail: andrea.gabrielli@math.ethz.ch
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Abstract

The chain-ladder method is one of the most popular claims reserving techniques. The aim of this study is to back-test the chain-ladder method. For this purpose, we use a stochastic scenario generator that allows us to simulate arbitrarily many upper claims reserving triangles of similar characteristics for which we also know the corresponding lower triangles. Based on these simulated triangles, we analyse the performance of the chain-ladder claims reserving method.

Keywords

Chain-ladderIndividual claims history simulation machineClaims reservingBack-testingReserve uncertainty

Information

Type
Paper
Information
Annals of Actuarial Science , Volume 13 , Issue 2 , September 2019 , pp. 334 - 359
Copyright
© Institute and Faculty of Actuaries 2018 

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References

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