The multi-year non-life insurance risk in the additive loss reserving model

Diers, Dorothea; Linde, Marc

doi:10.1016/j.insmatheco.2013.03.004

Cited by 11 publications

(3 citation statements)

References 2 publications

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“…However, there might be the difficulty to estimate the corresponding parameters properly. In some cases, for example, in the additive model (Diers and Linde, 2013), at least the expectation value and the mean squared error of prediction can be analytically calculated so that, using the method of moments, a two‐parameter distribution can be fitted to the multi‐year CDR. In the Mack chain ladder model, this has not yet been done, which is another possibility of future research.…”

Section: Discussionmentioning

confidence: 99%

“…Recently, Diers and Linde (2013) developed an analytical approach for quantifying the prediction uncertainty of multi‐year observable claims development result (CDR) in the additive loss reserving model. However, especially in light of the need for simulated cash flows of future claim settlements within internal risk models, analytical approaches need to be complemented by simulation‐based approaches.…”

Section: Introductionmentioning

confidence: 99%

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Multi‐year non‐life insurance risk

Diers¹,

Eling

Kraus

et al. 2013

The Journal of Risk Finance

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Purpose -The purpose of this paper is to present a simulation-based approach for modeling multi-year non-life insurance risk in internal risk models. Strategic management in an insurance company requires a multi-year time horizon for economic decision making, for example, in the context of internal risk models. In the literature to date, only the ultimate perspective and, more recently, the one-year perspective (for Solvency II purposes) are considered. Design/methodology/approach -The authors present a way of defining and calculating multi-year claims development results and extend the simulation-based algorithm ("re-reserving") for quantifying one-year non-life insurance risk, presented in Ohlsson and Lauzeningks, to a multi-year perspective. Findings -The multi-year algorithm is applied to the chain ladder reserving model framework of Mack (1993). Practical implications -The usefulness of the new multi-year horizon is illustrated in the context of internal risk models by means of a case study, where the multi-year algorithm is applied to a claims development triangle based on Mack and on England and Verrall. This algorithm has been implemented in an excel tool, which is given as supplemented material. Originality/value -To the best of the authors' knowledge, there are no model approaches or studies on insurance risk for projection periods of not just one, but several, new accident years; this requires a suitable extension of the classical Mack model; however, consideration of multiple years is crucial in the context of enterprise risk management.

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Multi‐year non‐life insurance risk

Diers¹,

Eling

Kraus

et al. 2013

The Journal of Risk Finance

Self Cite

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“…Buckham et al (2011) defined reserve risk as a risk where additional technical provisions might have to be raised against previous years' claims. Diers and Linde (2013) defined reserve risk as embedding future accident years that lead to an integrated approach to quantifying multiyear risk arising from the settlement of outstanding claims.…”

Section: Literature Reviewmentioning

confidence: 99%

Alternative capital requirement for insurers: possibilities and issues

Zariņa

Voronova

Pettere

2021

IJEBR

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Solvency II framework regulates how much capital the insurance companies of the European Union must hold. Although the framework lasts four years, there is still place for improvements considering experience. The goals of the research are to propose an alternative capital model methodology using copulas for reserve risk and to show the case study of potential capital shift impact. To conduct the research, the authors have used the extensive literature review, analytical methods and modelling. Research scope is non-life insurance companies under the Solvency II framework with a focus on reserve risk. The research will help avoid that alternative models are only a modern risk management tool and add risk management reality. Higher capital surplus can be achieved if a copula approach is used for risk aggregation in the Baltic non-life market. The Baltic market does not use alternative capital requirement and internal models. Using an alternative model is the right insurer's approach in modern risk management.

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The 1-year premium risk

Fischinger¹,

Gach²

2021

Eur. Actuar. J.

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The multi-year non-life insurance risk in the additive loss reserving model

Cited by 11 publications

References 2 publications

Multi‐year non‐life insurance risk

Multi‐year non‐life insurance risk

Alternative capital requirement for insurers: possibilities and issues

The 1-year premium risk

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