Chapter 16
Claims Reserving and IBNR
Markus Gesmann
ChainLadder project London, United Kingdom
16.1 Introduction
16.1.1 Motivation
The insurance industry, unlike other industries, does not sell products as such, but rather promises. An insurance policy is a promise by the insurer to the policyholder to pay for future claims for an upfront received premium.
As a result, insurers do not know the upfront cost for their service, but rely on historical data analysis and judgment to predict a sustainable price for their offering. In General Insurance (or Non-Life Insurance, e.g. motor, property and casualty insurance); most policies run for a period of 12 months. However, the claims payment process can take years or even decades. Therefore, often not ...
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