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THE CHAIN LADDER TECHNIQUE — A STOCHASTIC MODELModel (2.2) is essentially a regression model whe. e the design matrix involves indicator variables. How. ver, the design based on (2.2) alone is singular. In view of constraint (2,3), the actual number of free parame. ers is 2s-1, yet model (2.2) has 2s+l parameters. By setting a1=b1=0, say, the ...
- 395KB
- 9
Dec 20, 2002 · The chain–ladder method is the most popular method of loss reserving. In its origin, it is nothing else than a heuristic and appealing algorithm. Because of the stochastic nature of the quantities to which the algorithm is applied, several authors have studied the question whether the chain–ladder method can be justified by a stochastic model and a statistical method related to the model.
- Klaus Th. Hess, Klaus D. Schmidt
- 2002
Jun 10, 2011 · The statistical model is cast in the form of a generalised linear model, and a quasi-likelihood approach is used. It is shown that this enables the method to process negative incremental claims. It is suggested that the chain-ladder technique represents a very narrow view of the possible range of models.
- A.E. Renshaw, R.J. Verrall
- 1998
Flexible Factor Chain Ladder Model: A Stochastic Framework for Reasonable Link Ratio Selections. Emanuel Bardis, FCAS, MAAA; Ali Majidi; and Daniel Murphy, FCAS, MAAA. Abstract: The popular General/Property-Casualty Insurance chain ladder method was first expanded to include variance calculations by Mack [1].
Dec 1, 1994 · We have also shown that model (5) is a stochastic model underlying the chain ladder method. Moreover, model (5) has only n - 1 parameters - as opposed to 2n - 1 (or even 2n) in case of model (4c) - and is therefore more robust than model (4c). Finally, one might argue that one advantage of the loglinear model (4c) is the fact that it allows to ...
- Thomas Mack
- 1994
Stochastic models underlying the CL algorithm B CLalgorithmisnotbased on a stochastic model (deterministic algorithm). B We need astochastic representationto quantify prediction uncertainty. B Stochastic models introduced providing the CL reserves:?Mack’s distribution-free CL model (1993)
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Can a chain ladder be used in a stochastic model?
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Does the chain ladder technique include a random component?
The chain ladder method is a simple and suggestive tool in claims reserving, and various attempts have been made aiming at its justification in a stochastic model. Remarkable progress has been achieved by Schnieper and Mack who considered models involving assumptions on conditional distributions.
