SIMULATION BASED COMPARISON OF STOCHASTIC CLAIMS RESERVING MODELS IN GENERAL INSURANCE

The appropriate estimation of incurred but not reported (IBNR) reserves is traditionally one of the most important task for property and casualty actuaries. As certain claims are reported considerably later after their occurrence, the amount and appropriateness of the reserves have a substantial effect on the financial results of institutions. In recent years, stochastic reserving methods have become increasingly widespread, supported by broad actuarial literature, describing development models and evaluation techniques. The cardinal aim of the present paper is to compare the appropriateness of several stochastic estimation methods, supposing different distributional underlying development models. For lack of analytical formulae in most of the model settings relevant from a practical perspective, due to the complex behavior of summed variables, simulations are performed to approximate distributions and results. Considering that the number of runoff triangles is generally limited, stochastically simulated scenarios contribute to feasible solutions. Stochastic reserving is taken into account as a stochastic forecast, thus comparison techniques developed for stochastic forecasts can be applied, opening up new informative perspectives beyond classical prediction measures, such as the mean square error of prediction.