Evaluation of claims reserve methods: claims payment pattern and Stanard-buhlmann, case study at prévoir insurance company (agriculture Cambodia)

Abstract

A claims reserve is money set aside for a claim that has been Reported But Not Settled (RBNS) or Incurred But Not Reported (IBNR). Claim reserves are crucial for the financial stability of insurance companies. Operationally, we can know the amount RBNS, but we don’t know the amount of IBNR. Therefore, actuarial literature has proposed numerous IBNR calculation methods, which are usually based on statistical concepts. However, the mutant and uncertain behavior of insurance environments for each insurance company does not make advisable to use a wide database across all insurance companies in Cambodia when calculating IBNR. As it is not advised by the regulator for any standard methodology of claim reserve calculation and each insurance company must define its own method based on its data and operational procedure. Prevoir (Kampuchea) Micro- Life Insurance in Cambodia, the first Micro Insurance licensed in Cambodia since 2011, has developed its methodology of claim reserve calculation by studying on claim settlement pattern and Stanard-buhlmann method. In this paper, we are going to share evaluation between the two methods after conducting experiment at Previor Insurance company. The Insurance company also operates in the agricultural insurance market.