This is the third post about Christofides’ paper on Regression models based on log-incremental payments [1]. The first post covered the fundamentals of Christofides’ reserving model in sections A - F, the second focused on a more realistic example and model reduction of sections G - K. Today’s post will wrap up the paper with sections L - M and discuss data normalisation and claims inflation.
I will use the same triangle of incremental claims data as introduced in my previous post.
Following on from last week’s post I will continue to go through the paper Regression models based on log-incremental payments by Stavros Christofides [1]. In the previous post I introduced the model from the first 15 pages up to section F. Today I will progress with sections G to K which illustrate the model with a more realistic incremental claims payments triangle from a UK Motor Non-Comprehensive account:
# Page D5.
A recent post on the PirateGrunt blog on claims reserving inspired me to look into the paper Regression models based on log-incremental payments by Stavros Christofides [1], published as part of the Claims Reserving Manual (Version 2) of the Institute of Actuaries.
The paper is available together with a spreadsheet model, illustrating the calculations. It is very much based on ideas by Barnett and Zehnwirth, see [2] for a reference.