Advantages and disadvantages of loss reserving methods in non-life insurance

Authors

  • Jelena Kočović Faculty of Economics, University of Belgrade, Belgrade, Serbia
  • Mirela Mitrašević Faculty of Business Economics Bijeljina, University of East Sarajevo, Bijeljina, Bosnia nad Hercegovina
  • Dejan Trifunović Faculty of Economics, University of Belgrade, Belgrade, Serbia

DOI:

https://doi.org/10.2298/YJOR180215003K

Keywords:

Loss Reserves, Chain Ladder Method, Loss Ratio Method, Bornhuetter-Ferguson Method

Abstract

We analyse characteristics of the three most commonly used methods for estimating loss reserves in non life insurance: the chain ladder method, the loss ratio method, and the Bornhuetter-Ferguson method. Our aim is to give a comparative analysis of the results obtained from applying these methods to a practical case, and to put emphasis on their advantages and disadvantages.

References

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Brown, R. L., and Gottlieb, L. R., Introduction to Ratemaking and Loss Reserving for Property and Casualty Insurance, Actex Publications, Winsted, Connecticut, 2001.

Chadick, C., Campbell, W., and Seith, F., “Comparison of Incurred But Not Reported (IBNR) Methods,” Society of Actuaries Health Section, 2009.

Faculty and Institute of Actuaries, Claims Reserving Manual, 1977.

Jovović, R. M., Merenje rizika pri utvrđivanju solventnosti neživotnih osiguravača, Univerzitet u Beogradu-Ekonomski fakultet, Beograd, Srbija, 2015.

Mack, T., “The Standard Error of Chain Ladder Reserve Estimates: Recursive Calculation and Inclusion of a Tail Factor,” ASTIN Bulletin: The Journal of the IAA, 29 (2) (1999) 361–366.

Mack, T., Parameter Estimation for Bornhuetter/Ferguson, Casualty Actuarial Society Forum, Fall, (2006) 141–157.

Mitrašević, M., Aktuarska i finansijska analiza adekvatnosti kapitala kompanija za neživotna osiguranja, doktorska disertacija, Ekonomski fakultet, Beograd, Srbija, 2010.

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Published

2019-11-01

Issue

Vol. 29 No. 4 (2019)

Section

Research Articles

License

Copyright (c) 2019 YUJOR

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