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FUNCTIONAL PROFILE TECHNIQUES FOR CLAIMS RESERVING

Published online by Cambridge University Press:  10 March 2022

Matúš Maciak Open the ORCID record for Matúš Maciak [Opens in a new window] ,
Ivan Mizera  and
Michal Pešta Open the ORCID record for Michal Pešta [Opens in a new window]
Matúš Maciak
Affiliation:
Faculty of Mathematics and Physics, Department of Probability and Mathematical Statistics, Charles University, Prague, Czech Republic E-mail: matus.maciak@mff.cuni.cz
Ivan Mizera
Affiliation:
Faculty of Science, Department of Mathematical and Statistical Sciences, University of Alberta, Edmonton, Canada E-mail: imizera@ualberta.ca
Michal Pešta*
Affiliation:
Faculty of Mathematics and Physics, Department of Probability and Mathematical Statistics, Charles University, Prague, Czech Republic
*
E-mail: michal.pesta@mff.cuni.cz, pesta@karlin.mff.cuni.cz
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Abstract

One of the most fundamental tasks in non-life insurance, done on regular basis, is risk reserving assessment analysis, which amounts to predict stochastically the overall loss reserves to cover possible claims. The most common reserving methods are based on different parametric approaches using aggregated data structured in the run-off triangles. In this paper, we propose a rather non-parametric approach, which handles the underlying loss development triangles as functional profiles and predicts the claim reserve distribution through permutation bootstrap. Three competitive functional-based reserving techniques, each with slightly different scope, are presented; their theoretical and practical advantages – in particular, effortless implementation, robustness against outliers, and wide-range applicability – are discussed. Theoretical justifications of the methods are derived as well. An evaluation of the empirical performance of the designed methods and a full-scale comparison with standard (parametric) reserving techniques are carried on several hundreds of real run-off triangles against the known real loss outcomes. An important objective of the paper is also to promote the idea of natural usefulness of the functional reserving methods among the reserving practitioners.

Keywords

Claims reservingnon-life insurancereserving riskfunctional datadevelopment profilesconsistencypermutation bootstrap
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 52 , Issue 2 , May 2022 , pp. 449 - 482
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of The International Actuarial Association

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