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Prediction uncertainties in the Cape Cod reserving method

Published online by Cambridge University Press:  18 February 2015

Annina Saluz
Annina Saluz*
Affiliation:
Department of Mathematics, RiskLab, ETH Zurich, 8092 Zurich, Switzerland
*
*Correspondence to: Annina Saluz, Department of Mathematics, RiskLab, ETH Zurich, 8092 Zurich, Switzerland. Tel: +41 44 632 68 30; Fax: +41 44 632 15 23; E-mail: annina.saluz@math.ethz.ch
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Abstract

The Cape Cod (CC) method was designed by Bühlmann and Straub in order to overcome some shortcomings of the chain ladder (CL) method. Owing to its simplicity and because of the advantages over the CL method, the CC method has become a well-established method in practice. In this paper we consider a distribution-free stochastic model for the CC method. Within this model we give the parameter estimates and we derive estimates for the conditional mean square error of prediction for the CC method. In addition, we derive an estimate for the uncertainty in the claims development result.

Keywords

Cape Cod methodClaims reservingMean square error of predictionClaims development result
Type
Papers
Information
Annals of Actuarial Science , Volume 9 , Issue 2 , September 2015 , pp. 239 - 263
Copyright
© Institute and Faculty of Actuaries 2015 

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