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A Stochastic Minimax Model to Calculate Outstanding Claims

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  • Antonio Ibarra Alfaraz
  • Santiago Leguey Galán
  • Ana Cid Cid
  • Ana Rabadán Gómez

Abstract

Correct estimation of the Outstanding Claims Reserve, an item that includes Incurred But Not Reported Claims (IBNR) as well as Incurred But Not Enough Reserved Claims (IBNER), is one of the most important issues currently facing actuarial science, due to its effect on the technical and financial stability of insurance companies. The purpose of this paper is to calculate the reserve in a decision-making environment, so that estimates can be made according to accurately defined and previously established rational criteria. Specifically, the estimating process enables a company’s particular situation to be taken into account, by incorporating its approach to the consequences arising from estimation errors into the model. The proposed calculation method gives rise to optimum link ratio estimators that can also be interpreted from a Bayesian perspective, with the advantages associated to such methodology. Copyright International Atlantic Economic Society 2006

Suggested Citation

  • Antonio Ibarra Alfaraz & Santiago Leguey Galán & Ana Cid Cid & Ana Rabadán Gómez, 2006. "A Stochastic Minimax Model to Calculate Outstanding Claims," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(4), pages 523-529, November.
    • Handle: RePEc:kap:iaecre:v:12:y:2006:i:4:p:523-529:10.1007/s11294-006-9047-x
    DOI: 10.1007/s11294-006-9047-x
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    References listed on IDEAS

    as
    1. England, Peter & Verrall, Richard, 1999. "Analytic and bootstrap estimates of prediction errors in claims reserving," Insurance: Mathematics and Economics, Elsevier, vol. 25(3), pages 281-293, December.
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    More about this item

    Keywords

    G22;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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