A Note on Simulation of Claim Activity for Use in Aggregate Loss Distributions

Aggregate loss distributions have been used in a number of different applications over the last few years. These applications have usually focused on the distribution of losses at ultimate or final values and have not studied how losses move to ultimate values over time. The approach outlined in this note models claim activity through the use of transition matrices. Individual claim activity is then incorporated into an aggregate loss simulation model to determine a number of distributions of interest. Keywords: Confidence Estimates, Loss Development, IBNR, Reinsurance Research - Loss Distributions, Size of