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Prediction of Outstanding Liabilities in Non-Life Insurance1

Published online by Cambridge University Press:  29 August 2014

Ragnar Norberg*
Affiliation:
University of Copenhagen
*
Laboratory of Actuarial Mathematics, Universitetsparken 5, DK-2100 Copenhagen Ø, Denmark.
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Abstract

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A fully time-continuous approach is taken to the problem of predicting the total liability of a non-life insurance company. Claims are assumed to be generated by a non-homogeneous marked Poisson process, the marks representing the developments of the individual claims. A first basic result is that the total claim amount follows a generalized Poisson distribution. Fixing the time of consideration, the claims are categorized into settled, reported but not settled, incurred but not reported, and covered but not incurred. It is proved that these four categories of claims can be viewed as arising from independent marked Poisson processes. By use of this decomposition result predictors are constructed for all categories of outstanding claims. The claims process may depend on observable as well as unobservable risk characteristics, which may change in the course of time, possibly in a random manner. Special attention is given to the case where the claim intensity per risk unit is a stationary stochastic process. A theory of continuous linear prediction is instrumental.

Type
Articles
Copyright
Copyright © International Actuarial Association 1993

Footnotes

1

Based on invited paper presented at the 23rd ASTIN Colloquium, Stockholm, 1991.

References

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