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A state space representation of the chain ladder linear model

Published online by Cambridge University Press:  20 April 2012

R. J. Verrall
R. J. Verrall
Affiliation:
City University, London
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Extract

In a recent paper, Kremer (1982) has shown how the classical chain ladder method for estimating outstanding claims on general insurance business is strongly related to a two-way analysis of variance. It can be argued that the estimation methods in a standard chain ladder analysis are inefficient from a statistical viewpoint and that an analysis of variance is more appropriate. Once the chain ladder method is identified with a standard statistical method, the well-known statistical theory can be used to the advantage of the claims reserver. For a further discussion of the use of main stream statistical theory applied to the least squares estimation of the linear model which is close to the chain ladder method, the reader is referred to Renshaw (1989).

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 116 , Issue 3 , December 1989 , pp. 589 - 609
Copyright
Copyright © Institute and Faculty of Actuaries 1989

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References

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