CLAIMS DEVELOPMENT RESULT AS AN INSTRUMENT TO SELECT A CLAIMS RESERVING METHOD FROM: CHAIN LADDER, MUNICH CHAIN LADDER, AND EXTENDED COMPLEMENTARY LOSS RATIO

• Main Author: ADI PRATAMA (NIM: 10114008), JULIANDO
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/28348
• Institution: Institut Teknologi Bandung

In the field of general insurance, including in a long-tail business, the claims reserve need to be determined to settle all claims. Claims data may be presented in a run-off triangle format, which is then used to predict the claims reserve based on certain claims reserving methods such as the Chain Ladder, the Munich Chain Ladder, and the Extended Complementary Loss Ratio. Selecting a claims reserving method can be based on the measure of uncertainty of the claims reserving prediction, such as the Mean Square Error (MSE). However, since for a certain reserving method or model, the MSE is difficult to be determined analytically, another measurement to select a claims reserving method is needed. One such measurement is the Claims Development Result, which is the difference between the ultimate claims prediction based on the raw data (recent data) and the ultimate claims prediction based on the data that has been developing for one accounting year. In this Final Project (Tugas Akhir), the Commercial Automobile Bodily Injury (CABI) claims data (Jing, 2009) is used as a case study. To determine the claims reserve, three methods are used, namely: the Chain Ladder, the Munich Chain Ladder, and the Extended Complementary Loss Ratio methods. Based on the value of the Claims Development Result which is close to zero, the Extended Complementary Loss Ratio method is selected to predict the claims reserve.