A comparison of models for the chain–ladder method

The chain–ladder method is the most popular method of loss reserving. In its origin, it is nothing else than a heuristic and appealing algorithm. Because of the stochastic nature of the quantities to which the algorithm is applied, several authors have studied the question whether the chain–ladder method can be justified by a stochastic model and a statistical method related to the model. In the present paper we compare a variety of such models. The comparison results in a flow chart for model selection which may help to decide in a specific situation whether the chain–ladder method should be applied or not.