Macro vs. Micro Methods in Non-Life Claims Reserving (an Econometric Perspective)

TL;DR

This paper compares macro and micro econometric models for non-life claims reserving, analyzing their theoretical properties and practical performance to understand their uncertainty estimates and effectiveness.

Contribution

It provides a comparative analysis of macro and micro econometric models, including theoretical insights and application to claims reserving data.

Findings

Micro models offer detailed insights into individual claims.

Macro models are effective for aggregate reserve estimation.

Both models show comparable uncertainty estimates.

Abstract

Traditionally, actuaries have used run-off triangles to estimate reserve ("macro" models, on agregated data). But it is possible to model payments related to individual claims. If those models provide similar estimations, we investigate uncertainty related to reserves, with "macro" and "micro" models. We study theoretical properties of econometric models (Gaussian, Poisson and quasi-Poisson) on individual data, and clustered data. Finally, application on claims reserving are considered.