Hostname: page-component-cb9f654ff-r5d9c Total loading time: 0 Render date: 2025-08-29T07:29:46.981Z Has data issue: false hasContentIssue false
  • English
  • Français

Chain Ladder Bias

Published online by Cambridge University Press:  17 April 2015

Greg Taylor
Greg Taylor*
Affiliation:
Taylor Fry Consulting Actuaries, Level 8, 30 Clarence Street, Sydney NSW 2000, Australia Centre for Actuarial Studies, Faculty of Economics and Commerce, University of Melbourne, Parkville VIC 3052, Australia, Phone: 61-2-9249-2901, Fax: 61-2-9249-2999, greg@taylorfry.com.au
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

The chain ladder forecast of outstanding losses is known to be unbiased under suitable assumptions. According to these assumptions, claim payments in any cell of a payment triangle are dependent on those from preceding development years of the same accident year. If all cells are assumed stochastically independent, the forecast is no longer unbiased. Section 5 shows that, under rather general assumptions, it is biased upward. This result is linked to earlier work on some stochastic versions of the chain ladder.

Keywords

Chain ladderIBNR

Information

Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 33 , Issue 2 , November 2003 , pp. 313 - 330
Copyright
Copyright © ASTIN Bulletin 2003

References

Hertig, J. (1985) A statistical approach to the IBNR-reserves in marine reinsurance. ASTIN Bulletin, 15, 171–183.CrossRefGoogle Scholar
Kallenberg, O. (1997) Foundations of modern probability (2nd ed). Springer.Google Scholar
Kremer, E. (1982) IBNR claims and the two-way model of ANOVA. Scandinavian Actuarial Journal, 47–55.CrossRefGoogle Scholar
Mack, T. (1993) Distribution-free calculation of the standard error of chain ladder reserve estimates. ASTIN Bulletin, 23, 213–221.CrossRefGoogle Scholar
Mack, T. (1994) Which stochastic model is underlying the chain ladder method? Insurance: mathematics and economics, 15, 133–138.Google Scholar
Renshaw, A.E. (1989) Chain ladder and interactive modelling (claims reserving and GLIM). Journal of the Institute of Actuaries, 116, 559–587.CrossRefGoogle Scholar
Stanard, J.N. (1985) A simulation test of prediction errors of loss reserve estimation techniques. Proceedings of the Casualty Actuarial Society, 72, 124–148.Google Scholar
Taylor, G.C. (1986) Loss reserving in non-life insurance. North-Holland, Amsterdam, Netherlands.Google Scholar
Taylor, G. (2000) Loss reserving: an actuarial perspective. Kluwer Academic Publishers, Dordrecht, Netherlands.CrossRefGoogle Scholar
Verrall, R.J. (1989) A state space representation of the chain ladder linear model. Journal of the Institute ofActuaries, 116, 589–609.CrossRefGoogle Scholar
Verrall, R.J. (1990) Bayes and empirical bayes estimation for the chain ladder model. Astin Bulletin, 20, 217–243.CrossRefGoogle Scholar
Verrall, R.J. (1991) On the estimation of reserves from loglinear models. Insurance: mathematics and economics, 10, 75–80.Google Scholar