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Valuation of Non-Life Liabilities from Claims Triangles

Author

Listed:
  • Mathias Lindholm

    (Department of Mathematics, Stockholm University, SE-106 91 Stockholm, Sweden)

  • Filip Lindskog

    (Department of Mathematics, Stockholm University, SE-106 91 Stockholm, Sweden)

  • Felix Wahl

    (Department of Mathematics, Stockholm University, SE-106 91 Stockholm, Sweden)

Abstract

This paper provides a complete program for the valuation of aggregate non-life insurance liability cash flows based on claims triangle data. The valuation is fully consistent with the principle of valuation by considering the costs associated with a transfer of the liability to a so-called reference undertaking subject to capital requirements throughout the runoff of the liability cash flow. The valuation program includes complete details on parameter estimation, bias correction and conservative estimation of the value of the liability under partial information. The latter is based on a new approach to the estimation of mean squared error of claims reserve prediction.

Suggested Citation

  • Mathias Lindholm & Filip Lindskog & Felix Wahl, 2017. "Valuation of Non-Life Liabilities from Claims Triangles," Risks, MDPI, vol. 5(3), pages 1-28, July.
    • Handle: RePEc:gam:jrisks:v:5:y:2017:i:3:p:39-:d:105172
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    References listed on IDEAS

    as
    1. Salzmann, Robert & Wüthrich, Mario V., 2010. "Cost-of-Capital Margin for a General Insurance Liability Runoff," ASTIN Bulletin, Cambridge University Press, vol. 40(2), pages 415-451, November.
    2. 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.
    3. Engsner, Hampus & Lindholm, Mathias & Lindskog, Filip, 2017. "Insurance valuation: A computable multi-period cost-of-capital approach," Insurance: Mathematics and Economics, Elsevier, vol. 72(C), pages 250-264.
    4. Ferriero, A., 2016. "Solvency capital estimation, reserving cycle and ultimate risk," Insurance: Mathematics and Economics, Elsevier, vol. 68(C), pages 162-168.
    5. Wüthrich Mario V. & Embrechts Paul & Tsanakas Andreas, 2011. "Risk margin for a non-life insurance run-off," Statistics & Risk Modeling, De Gruyter, vol. 28(4), pages 299-317, December.
    6. Ohlsson, Esbjörn & Lauzeningks, Jan, 2009. "The one-year non-life insurance risk," Insurance: Mathematics and Economics, Elsevier, vol. 45(2), pages 203-208, October.
    7. Kremer, Erhard, 1984. "A class of autoregressive models for predicting the final claims amount," Insurance: Mathematics and Economics, Elsevier, vol. 3(2), pages 111-119, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Engsner, Hampus & Lindskog, Filip & Thøgersen, Julie, 2023. "Multiple-prior valuation of cash flows subject to capital requirements," Insurance: Mathematics and Economics, Elsevier, vol. 111(C), pages 41-56.
    2. Mathias Lindholm & Felix Wahl, 2020. "On the variance parameter estimator in general linear models," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 83(2), pages 243-254, February.
    3. Wahl, Felix, 2019. "Explicit moments for a class of micro-models in non-life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 89(C), pages 140-156.
    4. Hampus Engsner & Filip Lindskog & Julie Thoegersen, 2021. "Multiple-prior valuation of cash flows subject to capital requirements," Papers 2109.00306, arXiv.org.

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