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. 13 min read, ~1,921 words.
Mack's model is distribution-free: three assumptions (mean factor, variance proportional to, AY independence) deliver the chain-ladder estimate plus a closed-form MSE. Mack's development factor is the volume-weighted average, with using divisor, not a simple average of link ratios. Poisson model assumes incremental claims; its MLE reproduces the chain-ladder reserve exactly...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 6b
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