Felix Wahl: The collective reserving model

Abstract: An insurance company commits itself to reimburse the insured given some event happening. Therefore the insurance company must set up reserves covering future payments. In this talk, I will focus on methods of calculating the "best estimate" reserve in the Solvency II Directive, which is a conditional expectation of future costs. The talk will be non-technical, introducing some traditional methods for estimating this expectation. Moreover, I will present the model we propose, the collective reserving model. This model is a micro-model, meaning that we assign distributions on the level of individual claims. We will see how assumptions on this level still yield simple expressions on the aggregate level, making for easy estimation of future costs.

(Based on joint work with Mathias Lindholm and Richard Verrall.)