The Complement of Credibility

This paper explains the most commonly used complements of credibility and offers a comparison of the effectiveness of the various methods. It includes numerous examples. It covers credibility complements used in excess ratemaking as well as those used in first dollar ratemaking. It also offers six criteria for judging the effectiveness of various credibility complements. One criterion, statistical independence, has not previously been covered in the actuarial literature. This paper should explain all the common credibility complements to the actuarial student.