An Approach to Estimate the Outstanding Loss Reserve of the Non-Life Insurer Under Solvency- II Regime

  • Authors

    • Ashiq Mohd Ilyas
    • S Rajasekaran
    2018-10-02
    https://doi.org/10.14419/ijet.v7i4.10.20940
  • Bootstrap, Chain Ladder Model, Claims Development Result, Claims Reserve, Solvency-II

  • Abstract

    This paper studies the reserve risk estimation requirement under the Solvency-II regime that came into effect in the European insurance sector in January 2016. In particular, it shows how the outstanding loss of a non-life insurer can be estimated under this regime. This regime totally replaces the traditional approaches of providing standard deviations of the liabilities over their full run-off. The requirement under this regime is that each risk shall be calibrated using a value-at-risk measure with 99.5 percentile confidence level over a single period. In connection with this, a bootstrap framework is used to estimate the uncertainty of loss reserve over the single period time horizon. Two process distributions are used namely Over-dispersed Poisson and Gamma in two separate bootstraps to estimate the uncertainty of loss reserve. Further, a comparison is established in the estimated results and it is found that Over-dispersed Poisson process distribution produces lower prediction errors than the gamma process distribution.

     

     

  • References

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  • How to Cite

    Mohd Ilyas, A., & Rajasekaran, S. (2018). An Approach to Estimate the Outstanding Loss Reserve of the Non-Life Insurer Under Solvency- II Regime. International Journal of Engineering & Technology, 7(4.10), 375-379. https://doi.org/10.14419/ijet.v7i4.10.20940

    Received date: 2018-10-04

    Accepted date: 2018-10-04

    Published date: 2018-10-02