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An Industry Question: The Ultimate And One-Year Reserving Uncertainty For Different Non-Life Reserving Methodologies

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  • Dal Moro, Eric
  • Lo, Joseph

Abstract

In the industry, generally, reserving actuaries use a mix of reserving methods to derive their best estimates. On the basis of the best estimate, Solvency 2 requires the use of a one-year volatility of the reserves. When internal models are used, such one-year volatility has to be provided by the reserving actuaries. Due to the lack of closed-form formulas for the one-year volatility of Bornhuetter-Ferguson, Cape-Cod and Benktander-Hovinen, reserving actuaries have limited possibilities to estimate such volatility apart from scaling from tractable models, which are based on other reserving methods. However, such scaling is technically difficult to justify cleanly and awkward to interact with. The challenge described in this editorial is therefore to come up with similar models like those of Mack or Merz-Wüthrich for the chain ladder, but applicable to Bornhuetter-Ferguson, mix Chain-Ladder and Bornhuetter-Ferguson, potentially Cape-Cod and Benktander-Hovinen — and their mixtures.

Suggested Citation

  • Dal Moro, Eric & Lo, Joseph, 2014. "An Industry Question: The Ultimate And One-Year Reserving Uncertainty For Different Non-Life Reserving Methodologies," ASTIN Bulletin, Cambridge University Press, vol. 44(3), pages 495-499, September.
    • Handle: RePEc:cup:astinb:v:44:y:2014:i:03:p:495-499_00
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    Cited by:

    1. Marcin Szatkowski & Łukasz Delong, 2021. "One-Year and Ultimate Reserve Risk in Mack Chain Ladder Model," Risks, MDPI, vol. 9(9), pages 1-29, August.

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