Copula based Bayesian data analysis of loss reserving
Article
Shakoori, A, Izadi, M, Khaledi, BE. (2024). Copula based Bayesian data analysis of loss reserving
. COMMUNICATIONS IN STATISTICS-SIMULATION AND COMPUTATION, 53(2), 727-743. 10.1080/03610918.2022.2032155
Shakoori, A, Izadi, M, Khaledi, BE. (2024). Copula based Bayesian data analysis of loss reserving
. COMMUNICATIONS IN STATISTICS-SIMULATION AND COMPUTATION, 53(2), 727-743. 10.1080/03610918.2022.2032155
Prediction of loss reserves corresponding to dependent lines of business is one of the most important problems in the actuarial sciences. In this paper, we propose a class of copula based multivariate distributions to model the losses with the heavy tailed distribution in the run-off triangles to predict unpaid losses. We set up ANOVA, ANCOVA, and state space models with four choices of copulas, Clayton, Frank, Gumbel, and Gaussian to provide a new procedure for analyzing run-off triangle tables. We use the Hamiltonian Monte Carlo sampler to perform a Bayesian analysis to estimate the parameters. We apply the proposed models to the data set consists of two lines of business of paid losses data from the Schedule P of the National Association of Insurance Commissioners (NAIC) database. Using some well known criteria, we compare the prediction accuracy of the mean models. As a result, the ANCOVA model with the Clayton copula dominates the other models.
