Economics - Research Publications

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Type: Preprint × Start date: 2000 × End date: 2009 × Subject: chain ladder × Subject: generalised linear model × Author: TAYLOR, GREGORY ×

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    Loss reserving with GLMs : a case study
    Taylor, Greg ; McGuire, Gráinne ( 2004-05)
    This paper provides a case study in the application of generalised linearmodels (“GLMs”) to loss reserving. The study is motivated by approachingthe exercise from the viewpoint of an actuary with a predisposition to theapplication of the chain ladder (“CL”).The data set under study is seen to violate the conditions for application of theCL in a number of ways. The difficulties of adjusting the CL to allow forthese features of the data are noted (Sections 3).Regression, and particularly GLM regression, is introduced as a structured andrigorous form of data analysis. This enables the investigation and modellingof a number of complex features of the data responsible for the violation of the CL conditions. These include superimposed inflation and changes in the rules governing the payment of claims (Sections 4 to 7).The development of the analysis is traced in some detail, as is the production of a range of diagnostics and tests used to compare candidate models and validate the final one.The benefits of this approach are discussed in Section 8.