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  #1  
Old 01-06-2018, 01:36 PM
Peter T.W. Chen Peter T.W. Chen is offline
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Default EBNR/IBNR method

Hi everyone,

I have a question about forecasting IBNR and EBNR.
I use a package, called "ChainLadder", in R. There are lots of method to calculate IBNR (I know it is similar to EBNR), such as "Mack", "Bootstrap", and "Munich", etc.
Which one is better to use and what is the difference between them?
Other good methods to forecast IBNR and EBNR?
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  #2  
Old 01-06-2018, 01:48 PM
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General Apathy General Apathy is offline
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Quote:
Originally Posted by Peter T.W. Chen View Post
Hi everyone,

I have a question about forecasting IBNR and EBNR.
I use a package, called "ChainLadder", in R. There are lots of method to calculate IBNR (I know it is similar to EBNR), such as "Mack", "Bootstrap", and "Munich", etc.
Which one is better to use and what is the difference between them?
Other good methods to forecast IBNR and EBNR?
The four most common methods are the reported loss development method (chainladder) the paid loss development method, the reported Bornhuetter-Ferguson (B-F) method and the paid B-F method.

There are other methods as well.

There is no right method but the reported B-F method is the most relied upon in general reserving. Each has weaknesses. The reported LDF method relies upon consistent case reserving while the reported B-F method relies up accurate a priori selections.

Fun fact: Ron Ferguson for whom the method is named spent two years in jail for basically manipulating reserves.
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  #3  
Old 01-06-2018, 02:01 PM
Peter T.W. Chen Peter T.W. Chen is offline
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Originally Posted by General Apathy View Post
The four most common methods are the reported loss development method (chainladder) the paid loss development method, the reported Bornhuetter-Ferguson (B-F) method and the paid B-F method.

There are other methods as well.

There is no right method but the reported B-F method is the most relied upon in general reserving. Each has weaknesses. The reported LDF method relies upon consistent case reserving while the reported B-F method relies up accurate a priori selections.

Fun fact: Ron Ferguson for whom the method is named spent two years in jail for basically manipulating reserves.
Do you mean clark's LDF method? Does LDF better than MackChainLadder?
How can I check whether it is consistent case reserve or not?

I have not heard B-F method before. Could you please suggest some references for me to learn?
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  #4  
Old 01-06-2018, 02:10 PM
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Quote:
Originally Posted by Peter T.W. Chen View Post
Do you mean clark's LDF method? Does LDF better than MackChainLadder?
How can I check whether it is consistent case reserve or not?

I have not heard B-F method before. Could you please suggest some references for me to learn?
What country are you in? I have often heard of B-F, but I'm in the US. Likewise I haven't heard of Clark's method. Maybe these are UK terminology??
I have nothing to contribute = even when I was an actuary, I worked on the life side of things, which use different techniques not applicable to P/C. I am simply curious about the terminology.

By the way, you could try looking at www.casact.org. They do have a lot of material, including this topic.
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Old 01-06-2018, 03:03 PM
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Originally Posted by Peter T.W. Chen View Post
Do you mean clark's LDF method? Does LDF better than MackChainLadder?
How can I check whether it is consistent case reserve or not?

I have not heard B-F method before. Could you please suggest some references for me to learn?
LDF method (at least from my reference) and chain ladder method are the same thing. It's the basic methodology for reserving. The other things you mention like Mack/bootstrapping/Munich I think these deal with minimizing error.

I think the best paper for these might be Friedland's paper on the current reserving syllabus (CAS exams).

It sounds like you are using R to estimate IBNR but don't understand the underlying principles. I would get some triangles and dump them into excel and figure out these methods if you have time.
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  #6  
Old 01-06-2018, 11:48 PM
Peter T.W. Chen Peter T.W. Chen is offline
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I'm from a small country, Taiwan. But actually I'm new in actuarial field for just working 1 year in P&C insurance company as an analyst. My major is statistics so I think I really need to learn more to improve my knowledge.
My boss asked me to study by myself and use ChainLadder package in R to analyze the EBNR of mobile phone insurance.
Therefore, I don't understand the underlying principles well and decide to ask seniors and find some sources on this outstanding platform.

@General Apathy
Sure. I want to learn more about these methods.
Thanks!

ActuarialOutpost is awesome and there are many kind and clever seniors.
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  #7  
Old 01-07-2018, 08:21 PM
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I recommend chapter 37 of "Group Insurance":
https://www.actexmadriver.com/product.aspx?id=453107273

Happy/honored to be the fourth author of the chapter.
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Old 01-08-2018, 11:21 AM
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I recommend chapter 37 of "Group Insurance":
https://www.actexmadriver.com/product.aspx?id=453107273

Happy/honored to be the fourth author of the chapter.
I thought that part was pretty wordy and garbled.

Just kidding, I never read any of the textbooks.
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  #9  
Old 01-08-2018, 11:29 AM
Dr T Non-Fan Dr T Non-Fan is offline
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Originally Posted by Colymbosathon ecplecticos View Post
Never miss a chance at SOA self-aggrandizement. The OP says that he's a P&C guy, and you suggest a book entitled "Group Insurance", chapter number 37 --- yes, that certainly is the main focus of that book.

No doubt, the CAS (free) references are more appropriate.
If one were "better" than the others, the others would cease to be used.
Like the "Geocentric Universe Model."
For you and your particular estimate, one might be better than the others, though only at certain times. You'll have to know a lot more about your product for you to make the decision.
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  #10  
Old 01-08-2018, 12:01 PM
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Dang, I missed a deleted post.

The fact that the book is on the SOA's syllabus does not mean that (a) we wrote it for the SOA, or that (b) it wouldn't be useful for the poster's needs.
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