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Adam, F. F. (2018). Claim Reserving Estimation by Using the Chain Ladder Method. KnE Social Sciences, 3(11), 1192–1204. https://doi.org/10.18502/kss.v3i11.2840

https://doi.org/10.18502/kss.v3i11.2840

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  • F F Adam
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Published Date

  • Aug 8, 2018

Claim Reserving Estimation by Using the Chain Ladder Method

KnE Social Sciences / The 2nd International Conference on Vocational Higher Education (ICVHE) 2017 / Pages 1192–1204

Abstract

An insurance company promises its policyholders to pay out benefits if certain events occur, for example, events such as a car accident and health conditions. When this is happens, the insurance company has a liability to pay the claim by claim reserving. The calculation of claim reserving must be done carefully in such a way that it should not cause loss to the company. One of the simplest methods to calculate claim reserving is the chain ladder method (CL). The method uses an algorithm that can be used to estimate claim reserving in the future. The CL method estimates the claim reserving to be paid by using run-off triangle data. The rows on a run-off triangle data represent claim occurrence periods and the columns represent development periods, the periods when claim were settled. The real data used is a claim amount observed in the past that is located in the upper-left triangle, and the lower triangle has to be estimated. This research will use the data from one of the insurance companies in Indonesia taken from OJK.


 


 


Keywords: claim, CL method, run-off triangle, claim reserving

References
[1] A. Carrato et al. Claims reserving with R: ChainLadder-0.2.2 Package Vignette. 2015. https://cran.rroject.org/web/packages/ChainLadder/vignettes/ChainLadder.pdf, accessed on 3/16/2016


[2] Muttaqin et al. Run-Off Triangle Data dan Permasalahannya. Statistika, Vol. 8 No. 1, 55 – 59 Mei 2008.


[3] B. Weindorfer. A practical guide to the use of the chain-ladder method for determining technical provisions for outstanding reporting claims in non-life insurance. Working papers series by University of Applied science BFI Vienna. 2012.


[4] I.L. Gould. Stochastic chain-ladder models in Non-life insurance. 2008. The University of Bergen. Master Thesis.


[5] T. Mack. Distribution-free calculation of the standard error of chain ladder reserve estimates. ASTIN Bulletin, Volume 23, Issue 2. November 1993, pp. 213-225.


[6] T. Mack. The standard error of chain ladder reserve estimates: recursive calculation and inclusion of a tail factor. ASTIN Bulletin, Volume 29, Issue 2 November 1999, pp. 361-366.


[7] P G Weke, A T Mureithi. Deterministic claims reserving in short-term insurance contract. East African Journal of Statistics. Vol 1, No 2, 2006.