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Prediction Error of the Chain Ladder Reserving Method applied to Correlated Run-off Triangles

Published online by Cambridge University Press:  10 May 2011

M. Merz  and
M. V. Wüthrich
M. Merz
Affiliation:
University of Tübingen, Faculty of Economics, D-72074, Germany
M. V. Wüthrich
Affiliation:
ETH Zürich, Department of Mathematics, CH-8092 Zürich, Switzerland
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Abstract

In Buchwalder et al. (2006) we revisited Mack's (1993) and Murphy's (1994) estimates for the mean square error of prediction (MSEP) of the chain ladder claims reserving method. This was done using a time series model for the chain ladder method. In this paper we extend the time series model to determine an estimate for the MSEP of a portfolio of N correlated run-off triangles. This estimate differs in the special case N = 2 from the estimate given by Braun (2004). We discuss the differences between the estimates.

Keywords

Claims ReservingChain LadderMean Square Error of PredictionPrediction ErrorCorrelated Business LinesRun Off
Type
Papers
Information
Annals of Actuarial Science , Volume 2 , Issue 1 , March 2007 , pp. 25 - 50
Copyright
Copyright © Institute and Faculty of Actuaries 2007

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References

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