Prediction of outstanding liabilities in non-life insurance.

Abstract

A fully time-continuous approach is taken to the problem of predicting the total liability of a non-hfe insurance company Claims are assumed to be generated by a non-homogeneous marked Polsson process, the marks representing the developments of the individual claims. A first basic result is that the total claim amount follows a generalized Poisson distribution. Fixing the time of consideration, the claims are categorized into settled, reported but not settled, incurred but not reported, and covered but not incurred. It is proved that these four categories of claims can be viewed as arising from independent marked Polsson processes By use of this decomposition result predictors are constructed for all categories of outstanding claims. The claims process may depend on observable as well as unobservable risk characteristics, which may change in the course of time, possibly in a random manner Special attention ~s gwen to the case where the claim Intensity per risk unit IS a stationary stochastic process. A theory of continuous linear pre&ctlon ~s mstrumental.