When setting reserves, two popular methods are the Development Method (Chain Ladder) and the Cape Cod Method. These two methods are good for estimating ultimate claims and reserves. One shortcoming, though, is that these methods give point estimates and do not give information about the rate at which claims will develop. A second shortcoming is that these methods lack variance estimates associated with its point estimations. For our project, we used David R. Clark’s paper, LDF Curve-Fitting and Stochastic Reserving, to address these shortcomings. Using the Weibull and Loglogistic Distribution Curves, we are able to obtain parameters to best fit our actual data. Doing so allows us to estimate the rate at which claims develop, in addition to the reserve point estimates. Additionally, we are then able to calculate the total variance, broken down into process variance and parameter variance.

• This report represents the work of one or more WPI undergraduate students submitted to the faculty as evidence of completion of a degree requirement. WPI routinely publishes these reports on its website without editorial or peer review.

Creator

• Lee, Kieran
• Ahearn, Zachary

Publisher

• Worcester Polytechnic Institute

Identifier

• 63546
• E-project-042522-193116

Parola chiave

• Actuarial
• Reserve

Advisor

• Posterro, Barry John
• Abraham, Jon P.

Year

• 2022

Date created

• 2022-04-25

Resource type

• Major Qualifying Project

Major

• Actuarial Mathematics

Rights statement

• In Copyright