ESTIMATION OF IBNR AND RBNS RESERVES USING RDC METHOD AND GAMMA GENERALIZED LINEAR MODEL

Abstract

Estimation of claims reserves is a very important role for insurance companies because the information will be used to assess the insurance company’s ability to meet future claim payment obligations. In practice, claims reserves are divided into two Incurred but Not Reported (IBNR) and Reported but Not Settled (RBNS). Reserving by Detailed Conditioning (RDC) is one of the individual methods that can estimate claims reserves of both the IBNR and RBNS, which involves detailed condition so-called claim characteristics, and some information else so-called background variable. The result of estimating claims reserves using RDC with background variable is not stable because many combinate of calculation from each background variable. The purpose of this study is to overcome these problems, which we can combine RDC and Gamma Generalized Linear Model (GLM) as an effective method for estimating claims reserves. By using Bootstrapping Individual Claims Histories (BICH) method, the results show that estimation of claims reserves using RDC and Gamma GLM gives the fewest value of Mean Square Error of Prediction (MSEP) rather than RDC with Poisson GLM, RDC, and Chain Ladder. Where the smaller the value of the resulting MSEP estimate, the closer to the actual claim reserve value.

Keywords

• ibnr
• rbns
• rdc
• gamma generalized linear models
• reserves