Copula-based modeling for IBNR claim loss reserving

Document Type : Article

Authors

1 School of Mathematical and Statistical Sciences, Southern Illinois University Carbondale, IL 62901, USA

2 Department of Statistics, Faculty of Mathematical Sciences, Shahid Beheshti University, Tehran, Iran

3 Department of Statistics, Science and Research Islamic Azad University, Tehran, Iran

4 Department of Mathematical Sciences, Stevens Institute of Technology, Hoboken, NJ 07030, USA

Abstract

There are growing concerns for reserves estimation of incurred but not reported (IBNR) claims in actuarial
sciences. In this paper, we propose a copula-based dependency model to capture the relationship between
two main IBNR reserve variables, i.e., the “time between two successive occurrences” and “delay time”.
A maximum likelihood estimation (MLE) method is used to estimate the parameters of the model. A
simulation study is conducted to evaluate the validity of the theoretical results. Moreover, the proposed
method is applied to predict the number of claims for the next years of a portfolio from a major automobile
insurer and is compared to the classical Chain Ladder model forecasting.

Keywords

References

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Scientia Iranica
Volume 31, Issue 18
Transactions on Industrial Engineering (E)
November and December 2024
Pages 1596-1605

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