On the Accuracy of Loss Reserving Methodology

We evaluate the performance of various loss reserving methods and their associated parameterizations under a number of environments (e.g., changes in case reserve adequacy). We simulate proxy loss development data for each environment, which enables us to measure the accuracy of various actuarial projection methods. Then, based on our results, we offer a roadmap the reserving actuary may use in order to select appropriate methodologies and parameterizations given the current, past, and expected future environmental conditions affecting the reserving process.

Keywords: suitability testing; loss reserving; reserving methods; loss development; management best estimate; simulation.