DOUBLE CHAIN LADDER METHOD WITH ZERO-CLAIMS AND DEVELOPMENT INFLATION PRIOR INFORMATION FOR IBNR AND RBNS CLAIMS RESERVING

• Main Author: AHMAD SABIQ (NIM:10114090), ILHAM
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/27966
• Institution: Institut Teknologi Bandung

The Basic Chain Ladder method is often used to estimate the outstanding claims reserve for a long-tail business. A general insurance company need to determine the reserve in order to pay those claims reported by policyholders. However, the Basic Chain Ladder method is unable to separate between a reserve for the Incurred But Not Reported (BNR) claims and that for the Reported But Not Settled (RBNS) claims when the method is only applied to a runoff triangle of claims severity. In this final project (Tugas Akhir), the Basic Chain Ladder and the Double Chain Ladder methods are discussed. The Double Chain Ladder method is another method to determine the outstanding claims reserve, which with the addtional information on the reported claims frequency and the prior information on the development inflation, is able to separate between the IBNR and RBNS claims reserves. The prior information will not change significantly the estimated claims reserve obtained by the Double Chain Ladder method; but it will provide better insight on future claims distribution. To compare the quality of the estimators given by different estimation techniques, the prediction error is used. The prediction error is determined using a bootstrapping technique. The method with the smallest prediction error is chosen to estimate the claims reserve.