ASTIN Bulletin

Research Article

Cash Flow Simulation for a Model of Outstanding Liabilities Based on Claim Amounts and Claim Numbers

María Dolores Martínez Mirandaa1, Bent Nielsena2, Jens Perch Nielsena3 and Richard Verralla4

a1 University of Granada, Campus Fuentenueva, 18071, Granada, Spain, E-mail: mmiranda@ugr.es

a2 Nuffield College, Oxford OX1 1NF, U.K., E-mail: bent.nielsen@nuffield.ox.ac.uk

a3 Cass Business School, City University London, 106 Bunhill Row, London EC1Y 8TZ, U.K., E-mail: Jens.Nielsen.1@city.ac.uk

a4 Cass Business School, City University London, E-Mail: r.j.verrall@city.ac.uk

Abstract

In this paper we develop a full stochastic cash flow model of outstanding liabilities for the model developed in Verrall, Nielsen and Jessen (2010). This model is based on the simple triangular data available in most non-life insurance companies. By using more data, it is expected that the method will have less volatility than the celebrated chain ladder method. Eventually, our method will lead to lower solvency requirements for those insurance companies that decide to collect counts data and replace their conventional chain ladder method.

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