ABSTRACT
In many loss reserve analyses, especially
those involving long-tail casualty lines, the loss development triangle may end
before all the claims are settled and before the nal costs of any year are
known. That is, in loss reserving we implicitly assume that there are no claims
after the oldest origin year is fully developed. However, it is not appropriate
to assume that the oldest origin year is fully settled. This is because it is
possible to have incurred but not reported claims after the oldest origin year
is fully settled.The study was conducted to project future claims after the
run-o triangle is fully run o . Claims data was collected from the State
Insurance Company (SIC) Limited motor insurance for a period of six(6) years.
The R-software and the spreadsheet were used to analysis claims data using the
chain ladder and tail factor techniques. The study revealed that the motor
insurance department of SIC would pay extra 3% of claims after estimated
outstanding reserves of about 14 million Ghana cedis. It was therefore, recommended
that SIC motor insurance department should set aside extra 3% of the estimated
reserve to cater for possible incurred but not reported claims in 2015 and
beyond.
CHAPTER 1
Introduction
1.1 Background of
the Study
The insurance industry, like State Insurance Company (SIC)
LTD, does not sell commodi-ties as such but rather assurances. An insurance
policy is an assurance by the insurer to the policyholder to recompense for
future claims for an upfront received premium.Consequently, insurers do not
know the upfront cost for their service, but rely on past data analysis and
judgment to predict a viable price for their contribution. In Non-Life
Insurance, e.g. motor insurance; most policies administered for a period of
twelve (12) months. Nevertheless, the claims allowance or payment manner can
take years. As a result, at all times not even the delivery date of their
product is known to insurers. Especially, losses coming from non-life insurance
can take a long time to settle and even when the claims are acknowledged, it
may take time to establish the extent of the claims settlement cost. Claims can
take years to show up. It should come as no shock that the largest item on the
liabilities side of an insurer’s balance sheet is often the provision or
reserves for future claims payments. These reserves can be divided into case
reserves (or outstanding claims), which are losses already reported to the
insurance company and losses that are incurred but not reported (IBNR) yet.
Historically, reserving was based on deterministic
calculations with pen and paper, combined with expert judgement. Since the 1980s,
with the arrival of personal computer, spreadsheet software has become very
popular for reserving. Spreadsheets not only reduced the calculation time, but
allowed actuaries to test di erent scenarios and the sensitivity of their
forecasts. As computers became more powerful, ideas of more sophisticated
models started to evolve. Changes in regulatory requirements, have fostered
further research and promoted the use of stochastic and statistical techniques.
In particular, for many countries, extreme percentiles of reserve deterioration
over a xed time period have to be estimated for the purpose of capital setting.
Several methods and models have been developed over the years, to estimate both
the level and variability of reserves for insurance claims; Schmidt (2012) or
P.D. England & R.J. Verrall (2002) for an overview.
In tradition, many actuaries use the Mack chain-ladder and
bootstrap chain-ladder models along with stress testing scenario analysis and
expert judgment to estimate ranges of reasonable results; surveys of U.K.
actuaries in 2002.
In most analysis of loss reserve , mainly those relating to
long tail casualty lines, the loss development triangle may end before all the
claims are settled and before the nal costs of any year are known. In most
times,some actuaries add to the development factors they obtain from available
run o triangle with a tail factor that estimates the development beyond the end
of the development period for which the link ratio could be estimated.
1.2 Background of
study area
1.2.1 SIC Non-life
insurance contracts:
The State Insurance Company has three main contracts. They
are usually casualty, prop-erty and personal accident insurance contracts. The
Casualty insurance contracts defend customers of SIC against the risk of
causing harm to third parties as a result of their jus-ti able activities. The
Property insurance policies mainly reimburse SICs customers for damages su ered
to their properties or for the value of property lost. The Personal ac-cident
insurance contracts mainly recompense the policy holder for injuries su ered.
For all these three contracts, premiums are recognised as earned premiums
proportionally over the period of coverage. The premium share received on
operational contracts that relates to unexpired risks at the statement of
nancial position date is reported as the unearned premium liability.
Furthermore, in statement of nancial position position premiums are shown
before deduction of commission. Loss and claims expenses are charge to income
as incurred, based on the estimated liability for compensation owed to contract
holders or third party properties damaged by the contract holders. These
include indirect and direct claims settlement costs emanating from events that
have occurred up to the statement of nancial position date event if they have
not yet been reported to the SIC. The State Insurance Company does not discount
its liabilities for unpaid claims other than for dis-ability claims. Liabilities
for unpaid claims are estimated using the input of assessments for individual
cases reported to SIC and the use of statistical analyses for the claims
incurred but not reported, and to estimate the expected ultimate cost
of more complex claims that may be aected by external factors like court
decisions.
For more Mathematics Projects Click here
===================================================================Item Type: Ghanaian Topic | Size: 65 pages | Chapters: 1-5
Format: MS Word | Delivery: Within 30Mins.
===================================================================
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.