Semiparametric model for prediction of individual claim loss reserving

Xiao Bing Zhao, Xian Zhou*, Jing Long Wang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

20 Citations (Scopus)

Abstract

The estimation of loss reserves for incurred but not reported (IBNR) claims presents an important task for insurance companies to predict their liabilities. Conventional methods, such as ladder or separation methods based on aggregated or grouped claims of the so-called "run-off triangle", have been illustrated to have some drawbacks. Recently, individual claim loss models have attracted a great deal of interest in actuarial literature, which can overcome the shortcomings of aggregated claim loss models. In this paper, we propose an alternative individual claim loss model, which has a semiparametric structure and can be used to fit flexibly the claim loss reserving. Local likelihood is employed to estimate the parametric and nonparametric components of the model, and their asymptotic properties are discussed. Then the prediction of the IBNR claim loss reserving is investigated. A simulation study is carried out to evaluate the performance of the proposed methods.

Original languageEnglish
Pages (from-to)1-8
Number of pages8
JournalInsurance: Mathematics and Economics
Volume45
Issue number1
DOIs
Publication statusPublished - Aug 2009

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