SPLICE: A Synthetic Paid Loss and Incurred Cost Experience Simulator

TL;DR

SPLICE is an R package that simulates detailed individual claim experiences, including incurred losses and revisions over time, incorporating dependencies and payment histories for more realistic insurance claim modeling.

Contribution

It introduces a novel simulator for incurred loss estimates and revisions, building on existing tools to include dependencies and payment history integration.

Findings

Simulates claim estimates and revisions in continuous time.

Incorporates dependencies related to ultimate claim size.

Provides a publicly available, open-source R package.

Abstract

In this paper, we first introduce a simulator of cases estimates of incurred losses, called `SPLICE` (Synthetic Paid Loss and Incurred Cost Experience). In three modules, case estimates are simulated in continuous time, and a record is output for each individual claim. Revisions for the case estimates are also simulated as a sequence over the lifetime of the claim, in a number of different situations. Furthermore, some dependencies in relation to case estimates of incurred losses are incorporated, particularly recognizing certain properties of case estimates that are found in practice. For example, the magnitude of revisions depends on ultimate claim size, as does the distribution of the revisions over time. Some of these revisions occur in response to occurrence of claim payments, and so `SPLICE` requires input of simulated per-claim payment histories. The claim data can be summarized by accident and payment "periods" whose duration is an arbitrary choice (e.g. month, quarter, etc.) available to the user. `SPLICE` is a fully documented R package that is publicly available and open source (on CRAN). It is built on an existing simulator of individual claim experience called `SynthETIC` (Avanzi et al., 2021a,b), which offers flexible modelling of occurrence, notification, as well as the timing and magnitude of individual partial payments. This is in contrast with the incurred losses, which constitute the additional contribution of `SPLICE`. The inclusion of incurred loss estimates provides a facility that almost no other simulators do.