Understand, interpret, and apply the following statistical models and assumptions used for outstanding claims reserves: Mack's model, Poisson model, and Overdispersed Poisson model.
Free SOA Exam ASTAM (Advanced Short-Term Actuarial Mathematics) lesson in Reserving and Pricing for Short-Term Insurance Coverages. 11 min read, ~1,682 words.
Mack's model is distribution-free. Three assumptions (mean, variance, independence) deliver the chain-ladder point estimate plus a closed-form MSE. Poisson model assumes incremental claims. The MLE reproduces the chain-ladder reserve exactly. Overdispersed Poisson (ODP) keeps the multiplicative mean but inflates variance:, with typical. All three give the same reserve point estimate...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 6b
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