Prakash Narayan and Thomas Warthen
Abstract
Actuaries are often asked to provide a range or confidence level for the loss reserve along with a point estimate. Traditional methods of loss reserving do not provide an estimate of the variance of the estimated reserve, and actuaries use various ad hoc methods to derive a range for the indicated reserve. We use a Monte Carlo simulation method to compare various loss reserve estimation methods, including traditional methods and regression-based methods of loss reserving.
Key words and phrases: loss development factor, loss triangle, severity, reporting delays, regression, loss ratio.
Prakash Narayan
RLI Insurance
9025 N Lindbergh Drive
Peoria IL 61615-1431
Thomas Warthen
RLI Insurance
9025 N Lindbergh Drive
Peoria IL 61615-1431
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