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Chain Ladder Bias

Published online by Cambridge University Press:  17 April 2015

Greg Taylor
Greg Taylor*
Affiliation:
Taylor Fry Consulting Actuaries, Level 8, 30 Clarence Street, Sydney NSW 2000, Australia Centre for Actuarial Studies, Faculty of Economics and Commerce, University of Melbourne, Parkville VIC 3052, Australia, Phone: 61-2-9249-2901, Fax: 61-2-9249-2999, [email protected]
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Abstract

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The chain ladder forecast of outstanding losses is known to be unbiased under suitable assumptions. According to these assumptions, claim payments in any cell of a payment triangle are dependent on those from preceding development years of the same accident year. If all cells are assumed stochastically independent, the forecast is no longer unbiased. Section 5 shows that, under rather general assumptions, it is biased upward. This result is linked to earlier work on some stochastic versions of the chain ladder.

Keywords

Chain ladderIBNR
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 33 , Issue 2 , November 2003 , pp. 313 - 330
Copyright
Copyright © ASTIN Bulletin 2003

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