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A Marked Cox Model For The Number Of Ibnr Claims: Estimation And Application

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  • Badescu, Andrei L.
  • Chen, Tianle
  • Lin, X. Sheldon
  • Tang, Dameng

Abstract

Incurred but not reported (IBNR) loss reserving is of great importance for Property & Casualty (P&C) insurers. However, the temporal dependence exhibited in the claim arrival process is not reflected in many current loss reserving models, which might affect the accuracy of the IBNR reserve predictions. To overcome this shortcoming, we proposed a marked Cox process and showed its many desirable properties in Badescu et al. (2016). In this paper, we consider the model estimation and applications. We first present an expectation–maximization (EM) algorithm which guarantees the efficiency of the estimators unlike the moment estimation methods widely used in estimating Cox processes. In addition, the proposed fitting algorithm can be implemented at a reasonable computational cost. We examine the performance of the proposed algorithm through simulation studies. The applicability of the proposed model is tested by fitting it to a real insurance claim data set. Through out-of-sample tests, we find that the proposed model can provide realistic predictive distributions.

Suggested Citation

  • Badescu, Andrei L. & Chen, Tianle & Lin, X. Sheldon & Tang, Dameng, 2019. "A Marked Cox Model For The Number Of Ibnr Claims: Estimation And Application," ASTIN Bulletin, Cambridge University Press, vol. 49(3), pages 709-739, September.
    • Handle: RePEc:cup:astinb:v:49:y:2019:i:03:p:709-739_00
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    Citations

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    Cited by:

    1. Maciak, Matúš & Okhrin, Ostap & Pešta, Michal, 2021. "Infinitely stochastic micro reserving," Insurance: Mathematics and Economics, Elsevier, vol. 100(C), pages 30-58.
    2. Avanzi, Benjamin & Taylor, Greg & Wong, Bernard & Yang, Xinda, 2021. "On the modelling of multivariate counts with Cox processes and dependent shot noise intensities," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 9-24.
    3. Kristian Buchardt & Christian Furrer & Oliver Lunding Sandqvist, 2022. "Transaction time models in multi-state life insurance," Papers 2209.06902, arXiv.org, revised Feb 2023.
    4. Peng Shi & Glenn M. Fung & Daniel Dickinson, 2022. "Assessing hail risk for property insurers with a dependent marked point process," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 185(1), pages 302-328, January.
    5. Avanzi, Benjamin & Taylor, Greg & Wong, Bernard & Xian, Alan, 2021. "Modelling and understanding count processes through a Markov-modulated non-homogeneous Poisson process framework," European Journal of Operational Research, Elsevier, vol. 290(1), pages 177-195.
    6. Benjamin Avanzi & Greg Taylor & Bernard Wong & Alan Xian, 2020. "Modelling and understanding count processes through a Markov-modulated non-homogeneous Poisson process framework," Papers 2003.13888, arXiv.org, revised May 2020.
    7. Benjamin Avanzi & Gregory Clive Taylor & Bernard Wong & Xinda Yang, 2020. "On the modelling of multivariate counts with Cox processes and dependent shot noise intensities," Papers 2004.11169, arXiv.org, revised Dec 2020.
    8. Gao, Lisa & Shi, Peng, 2022. "Leveraging high-resolution weather information to predict hail damage claims: A spatial point process for replicated point patterns," Insurance: Mathematics and Economics, Elsevier, vol. 107(C), pages 161-179.

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