|previous article in this issue||next article in this issue|
Document Details :
Title: Discussion of the Mean Square Error of Prediction in the Chain Ladder Reserving Method
Author(s): VENTER, Gary G.
Journal: ASTIN Bulletin
Volume: 36 Issue: 2 Date: 2006
For a dozen or so years the chain ladder models of Murphy and Mack have
been known to give the same reserve estimates but differ slightly in their
assumptions and in their calculations of the reserve variance. Up until now no
one had provided a detailed analysis of the source of the difference in variance.
The current (BBMW) paper shows that this arises from a slight difference in
the estimates of the parameter variance piece, and this in turn comes from the
fact that for Murphy the errors in the estimates of the development factors
are independent, while under Mack’s assumptions they are merely uncorrelated.
This would suggest that any given data could be tested for the difference
in assumptions by computing correlations of functions of the estimated factors.
For instance a finding that some functions of the factors are correlated
but the factors themselves are uncorrelated would support Mack’s model over