Claim Reserving Estimation by Using the Chain Ladder Method


An insurance company promises its policyholders to pay out benefits if certain events occur, for example, events such as a car accident and health conditions. When this is happens, the insurance company has a liability to pay the claim by claim reserving. The calculation of claim reserving must be done carefully in such a way that it should not cause loss to the company. One of the simplest methods to calculate claim reserving is the chain ladder method (CL). The method uses an algorithm that can be used to estimate claim reserving in the future. The CL method estimates the claim reserving to be paid by using run-off triangle data. The rows on a run-off triangle data represent claim occurrence periods and the columns represent development periods, the periods when claim were settled. The real data used is a claim amount observed in the past that is located in the upper-left triangle, and the lower triangle has to be estimated. This research will use the data from one of the insurance companies in Indonesia taken from OJK.



Keywords: claim, CL method, run-off triangle, claim reserving

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