Loss reserving

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Reserved loss refers to the calculation of the reserves required for the general insurance business stage. This includes an outstanding claim backup .

Typically, the claim reserve represents money to be held by an insurance company so that it can meet all future claims arising from current policies and policies written in the past.

The method of calculating reserves in general insurance is different from that used in life insurance, pensions and health insurance because general insurance contracts usually have a much shorter duration. Most general insurance contracts are written for a period of one year, and there is usually only one premium payment at the start of the contract in exchange for coverage throughout the year. Reserves are calculated differently from contracts with longer durations with some premium payments because there are no future premiums to consider in this case. Reserves are calculated by estimating future losses from past losses.

Video Loss reserving

Method

The most popular order claim methods include the ladder chain method and the Bornhuetter-Ferguson method.

The chain-ladder method, also known as the development method, assumes that past experience is an indicator of future experience. The pattern of past loss development is used to estimate how the number of claims will increase (or decrease) in the future.

The Bornhuetter-Ferguson method uses both developmental losses in the past as well as independent initial estimates of expected final losses.

Maps Loss reserving

Great claim backup

Extraordinary claim backup in general insurance is the type of technical reserve or accounting provisions in the financial statements of insurance companies. They seek to quantify whether there is any liability for the reported and unresolved (RBNS) or unreported (RBNS) insurance claim. It is a technical reserve of an insurance company, and was established to provide future responsibility for claims that have occurred but not yet resolved.

An insurance policy provides, in return for premium payments, the receipt of liability for making payments to an insured person for the occurrence of one or more specific events (insurance claims) for a specified period of time. The occurrence of the specified event and the amount of both payments are usually modeled as random variables. In general, there are delays in the settlement of claims by the insurer, typical reasons are (i) reporting delays (the time gap between claim incident and claim reporting in the insurance company); (ii) the delay of completion as it usually takes time to evaluate the entire size of the claim. The time difference between a claim event and a claim closing (final settlement) can take days (eg in property insurance) but can also take years (usually in liability insurance).

The reservation claim now means that the insurer places sufficient provision of side premium payments, so that it can resolve all claims caused by this insurance contract. This is different from social insurance in which a person usually has a pay-as-you-go system which means premium payments are not matched by a contract that leads to a claim

Estimation methods

Various statistical methods have been established for the calculation of outstanding claims in general insurance. These include:

• The distribution-free staircase method
• The widespread Poisson (ODP) model
• Hertig log-normal chain-chain model
• Separation method
• Average cost per claim method
• Bornhuetter-Ferguson Method
• The paid payment claim chain (PIC) claims the model
• The bootstrap method
• Bayesian Method

Most of these methods are started as deterministic algorithms. The actuary then begins to develop and analyze the underlying stochastic model that justifies this algorithm. Perhaps, the most popular stochastic model is the free chain ladder method developed by T. Mack. This stochastic method makes it possible to analyze and measure uncertainty of predictions in liabilities of unpaid losses. Classical analyzes study the uncertainty of total predictions, while recent research (under the influence of Solvency 2) also studies the uncertainty of a year, called the development of claims (CDR).

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See also

• Occurred but not reported
• Staircase method
• Bornhuetter-Ferguson Method
• Actuarial sciences

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References

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Bibliography

• Meyers , Glenn G., Stochastic Loss Reserving Using Bayesian MCMC Model, CAS Monograph No. 1. 2015.

Source of the article : Wikipedia