Advantages and disadvantages of loss reserving methods in non-life insurance

Abstract

We analyse characteristics of the three most commonly used methods for estimating loss reserves in non life insurance: the chain ladder method, the loss ratio method, and the Bornhuetter-Ferguson method. Our aim is to give a comparative analysis of the results obtained from applying these methods to a practical case, and to put emphasis on their advantages and disadvantages. [Project of the Serbian Ministry of Education, Science and Technological Development, Grant no. 179005: The risks of financial institutions and markets in Serbia - microeconomic and macroeconomic approach]

Keywords

• loss reserves
• chain ladder method
• loss ratio method
• bornhuetter-ferguson method