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Speed of Finalization of Claims and Claims Runoff Analysis

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  • Taylor, G. C.

Abstract

To some extent, this paper provides theoretical back-up for Taylor's (1980b) see-saw method of analysis of outstanding claims. Section 3 deals with the payments per claim finalized (PPCF) method. This assumes PPCF to be a function of development year only. Section 4 carries out a theoretical investigation of the validity of this assumption. It is found that the assumption is not justified in general; that PPCF can (and usually will) be sensitive to changes in speed of finalization of claims; and that this sensitivity will depend on the convexity properties of PPCF as a function of development year. The analysis is made on the basis of the so-called hypothesis of invariant order. Section 5 develops the see-saw method from this theoretical basis, although Section 7 is at pains to point to situations in which that method remains applicable despite violation of the hypothesis of invariant order. Section 6 provides a numerical example.

Suggested Citation

  • Taylor, G. C., 1981. "Speed of Finalization of Claims and Claims Runoff Analysis," ASTIN Bulletin, Cambridge University Press, vol. 12(2), pages 81-100, December.
    • Handle: RePEc:cup:astinb:v:12:y:1981:i:02:p:81-100_00
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    Cited by:

    1. Stephan M. Bischofberger, 2020. "In-Sample Hazard Forecasting Based on Survival Models with Operational Time," Risks, MDPI, vol. 8(1), pages 1-17, January.

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