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Best estimate reserves and the claims development results in consecutive calendar years

Author

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  • Saluz, Annina
  • Gisler, Alois

Abstract

The claims development result (CDR) is the difference between the best estimate predictions of the ultimate claim in 2 successive years. With best estimate reserves it is often argued that CDR’s in consecutive years should fluctuate randomly around zero. However, in practice one frequently observes that CDR’s in a given line of business have the same sign over several consecutive years. We show that this is a phenomenon which is not unusual and to be expected in situations of change. Moreover, we show how situations of change can adequately be described by a model, taking into account the evolving external information.

Suggested Citation

  • Saluz, Annina & Gisler, Alois, 2014. "Best estimate reserves and the claims development results in consecutive calendar years," Annals of Actuarial Science, Cambridge University Press, vol. 8(2), pages 351-373, September.
    • Handle: RePEc:cup:anacsi:v:8:y:2014:i:02:p:351-373_00
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    Cited by:

    1. Avanzi, Benjamin & Taylor, Greg & Vu, Phuong Anh & Wong, Bernard, 2020. "A multivariate evolutionary generalised linear model framework with adaptive estimation for claims reserving," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 50-71.
    2. Bohnert, Alexander & Gatzert, Nadine & Kolb, Andreas, 2016. "Assessing inflation risk in non-life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 66(C), pages 86-96.
    3. Benjamin Avanzi & Gregory Clive Taylor & Phuong Anh Vu & Bernard Wong, 2020. "A multivariate evolutionary generalised linear model framework with adaptive estimation for claims reserving," Papers 2004.06880, arXiv.org.

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