Advanced statsitical methods in non-life insurance reserving

Malika Kabdenova

Master's thesis

Advanced statistical methods in non-life insurance reserving

Abstract:

Reserving has always been an important task for insurance companies. With the adoption of Solvency II directive, development of stochastic modelling for that purpose is becoming increasingly important as uncertainty of the predictions is legally required. The generalized linear model (GLM) is a popular method used for claims reserving, however, there is a need for development of models with more sophisticated correlation structures without the restrictive assumption of independence of incremental claims. This thesis implements the generalized linear mixed model (GLMM) on aggregated insurance dataset using more than one random effect. Both the theory behind GLM and GLMM as well reserving theory were discussed. Practical application of one GLM and three different GLMM models on a real dataset and their further comparison and diagnostics were carried out. The goal was to find the structure of the model best suited for the given dataset measured using several criteria.

Abstract:

Reserving has always been an important task for insurance companies. With the adoption of Solvency II directive, development of stochastic modelling for that purpose is becoming increasingly important as uncertainty of the predictions is legally required. The generalized linear model (GLM) is a popular method used for claims reserving, however, there is a need for development of models with more sophisticated correlation structures without the restrictive assumption of independence of incremental claims. This thesis implements the generalized linear mixed model (GLMM) on aggregated insurance dataset using more than one random effect. Both the theory behind GLM and GLMM as well reserving theory were discussed. Practical application of one GLM and three different GLMM models on a real dataset and their further comparison and diagnostics were carried out. The goal was to find the structure of the model best suited for the given dataset measured using several criteria.

Keywords

claims reserving, non-life insurance, generalized linear models, generalized linear mixed model, random effects, mixed models, panel data

Keywords

claims reserving, mixed models, generalized linear mixed model, random effects, non-life insurance, panel data, generalized linear models

Language used: English

Date on which the thesis was submitted / produced: 27. 10. 2016

Thesis defence

• Date of defence: 31. 1. 2018
• Supervisor: Pavel Zimmermann
• Reader: Michal Gerthofer

Vysoká škola ekonomická v Praze

Master programme / field:
Kvantitativní metody v ekonomice / Quantitative Economic Analysis