NEVRUZ, Ezgi Hacettepe Üniversitesi - Aktüerya Bilimleri Bölümü, Türkiye , GENÇTÜRK, Yasemin Hacettepe Üniversitesi - Fen Fakültesi - Aktüerya Bilimleri Bölümü, Turkey

COMPARISON OF THE PERFORMANCE OF SOME LOSS RESERVING METHODS WITH SIMULATION

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Since knowing future losses precisely could not be possible, insurer should allocate an adequate reserve in the loss process. For this purpose, insurer needs to select a suitable reserving method which estimates the expected liabilities truely. It is possible to choose the most suitable reserve method by carrying out performance tests. The performance of a method can be measured by the deviation between the estimated and the actual reserve. In this study, the loss development triangles (upper-left and lower-right triangles) are generated by using four simulation methods: random reporting factor method, random backward development factor method, indiviual losses with changing severity method and Pentikäinen and Rantala method. By using the simulated upper-left triangles, the estimated total reserves and the estimated loss reserves for each accident year are obtained with the chain ladder (CL) method, the Bühlmann complementary loss ratio (BCLR) method and three different regression models. The closeness of loss reserve estimations to actual loss reserves is tested by the performance criteria.

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Simulation , Bühlmann complementary loss ratio method , Loss development triangle , Loss reserve , Performance criteria , Regression models , Chain ladder method.

Anadolu University Journal of Science and Technology. A : Applied Sciences and Engineering

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