One-year reserve risk including a tail factor:closed formula and bootstrap approaches

Submitted on 29th July 2015

In this paper, we detail the main simulation methods used in practice to measure one-year reserve risk, and describe the bootstrap method providing an empirical distribution of the Claims Development Result (CDR) whose variance is identical to the closed-form expression of the prediction error proposed by Wthrich et al. (2008). In particular, we integrate the stochastic modeling of a tail
factor in the bootstrap procedure. We demonstrate the equivalence with existing analytical results and develop closed-form expressions for the error of prediction including a tail factor. A numerical example is given at the end of this study.

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48 pages
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Alexandre Boumezoued
Yoboua Angoua
Laurent Devineau
Jean-Philippe Boisseau
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