Analytic and bootstrap estimates of prediction errors in claims reserving

We consider an appropriate residual definition for use in a bootstrap exercise to provide a computationally simple method of obtaining reserve prediction errors for a generalized linear model which reproduces the reserve estimates of the chain ladder technique (under certain restrictions which are specified in the paper). We show how the bootstrap prediction errors an be computed easily in a spreadsheet, without the need for statistical software packages. The bootstrap prediction errors are compared with their analytic equivalent from other stochastic reserving models, and also compared with other methods commonly used, including Mack's distribution free approach a and methods based on log-linear models.

Keywords: Claims reserving; Chain ladder technique; Generalised linear models; Bootstrapping; Prediction errors