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Document Details : Title: Run-off Risk as Part of Claims Fluctuation Author(s): PENTIKÄINEN, T. , RANTALA, J. Journal: ASTIN Bulletin Volume: 16 Issue: 2 Date: November 1986 Pages: 113-147 DOI: 10.2143/AST.16.2.2015004 Abstract : A conventional practice in standard risk theory considerations has been to assume that claims are paid immediately as they have incurred (see BPP, item 3.1c, BPP is used as an abbreviation for the book "Risk Theory", 1984 edition, by Beard, Pentik/iinen, Pesonen). The delay of the claims settlement has been, of course, a central aspect in reserve calculation theory and practices, and numerous valuable works have been published on this topic in recent years. However, its regard in general model building and in risk theory considerations has gained little attention until recent years. The purpose of this paper is to contribute to this research work by discussing how the "run-off" risk, i.e., the variability due to the delay of the claims payment, could be incorporated into the standard risk theory models as a separate entry (see BPP, item 10.2e) and to find some evaluation of the order of magnitude of the "extra" (if any) fluctuation so rendered. We expect that the proposed technique can also be utilized in testing different reserve calculation methods and in comparing their effectiveness. The main ideas follow very much along the lines given by RANTALA in his doctoral thesis (1984). |
