One-year reserve risk including a tail factor: closed formula and bootstrap approaches
AbstractIn this paper, we detail the main simulation methods used in practice to measure one-year reserve risk, and describe the bootstrap method providing an empirical distribution of the Claims Development Result (CDR) whose variance is identical to the closed-form expression of the prediction error proposed by Wüthrich et al. (2008). In particular, we integrate the stochastic modeling of a tail factor in the bootstrap procedure. We demonstrate the equivalence with existing analytical results and develop closed-form expressions for the error of prediction including a tail factor. A numerical example is given at the end of this study.
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Date of creation: 01 Jul 2011
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Non‐life insurance; Reserve risk; Claims Development Result; Bootstrap method; Tail factor; Prediction error; Solvency II;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
- NEP-IAS-2011-07-13 (Insurance Economics)
- NEP-RMG-2011-07-13 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- England, Peter, 2002. "Addendum to "Analytic and bootstrap estimates of prediction errors in claims reserving"," Insurance: Mathematics and Economics, Elsevier, vol. 31(3), pages 461-466, December.
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