A Generic Claims Reserving Model: A Fundamental Risk Analysis

In their diversity, insurance risks often require very different types of claims reserving models to describe them and to estimate the necessary reserves. The tractability of the chain ladder has contributed to its popularity. A brief analysis is given of its statistical basis and its implied limitations, of which the most important is its propensity to underestimate the reserves. This paper proposes a new paradigm for actuarial risk analysis where the reserving estimate is just one of the many results it delivers. The generic claims reserving model is consistent with the claims development process, and from it a rich family of claims reserving models can be constructed. Without loss of generality, the variance is simply defined to be a function of the mean. No particular consideration is given to estimation procedures, as those will depend on the selected model structure.