Loss Development Forecasting Models: an Econometrician's View

This paper provides a number of comments on two well-known approaches to the problem of loss development forecasting, namely the chain ladder method and the development factor family. These comments are mainly based on recent forecasting experience in time series statistics and econometrics. Two major aspects of modeling loss reserves are reviewed: (i) trend modeling and (ii) model selection and forecast evaluation.

Keywords: Chain ladder; Development factor family; Forecast evaluation; Model selection; Trend modeling