Stochastic Chain-Ladder Reserving with Modeled General Inflation
We consider two possible approaches to the problem of incorporating explicit general (i.e., economic) inflation in the non-life claims reserve estimates and the corresponding reserve SCR, defined—as in Solvency II—under the one-year view. What we call the <i>actuarial approach</i> provid...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-12-01
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| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/11/12/221 |
| Summary: | We consider two possible approaches to the problem of incorporating explicit general (i.e., economic) inflation in the non-life claims reserve estimates and the corresponding reserve SCR, defined—as in Solvency II—under the one-year view. What we call the <i>actuarial approach</i> provides a simplified solution to the problem, obtained under the assumption of deterministic interest rates and absence of inflation risk premia. The <i>market approach</i> seeks to eliminate these shortcomings by combining a stochastic claims reserving model with a stochastic market model for nominal and real interest rates. The problem is studied in details referring to the stochastic chain-ladder provided by the Over-dispersed Poisson model. The application of the two approaches is illustrated by a worked example based on market data. |
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| ISSN: | 2227-9091 |