A Comprehensive, Non-Aggregated, Stochastic Approach to Loss Development

By Uri A. Korn

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Abstract

In this paper, we present a stochastic loss development approach that models all the core components of the claims process separately. The benefits of doing so are discussed, including the provision of more accurate results by increasing the data available to analyze. This also allows for finer segmentations, which is helpful for pricing and profitability analysis.

Keywords: Loss development, frequency, severity, reserve variability, Cox proportional hazards model

Citation

Korn, Uri A., "A Comprehensive, Non-Aggregated, Stochastic Approach to Loss Development," Variance 10:1, 2016, pp. 13-33.

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Mission Statement

Variance (ISSN 1940-6452) is a peer-reviewed journal published by the Casualty Actuarial Society to disseminate work of interest to casualty actuaries worldwide. The focus of Variance is original practical and theoretical research in casualty actuarial science. Significant survey or similar articles are also considered for publication. Membership in the Casualty Actuarial Society is not a prerequisite for submitting papers to the journal and submissions by non-CAS members is encouraged.