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6 Advantages to Probabilistic Trend Family
- 1. Allows separation of parameter uncertainty and process variance
- 2. Check that assumptions in model are satisfi ed by the data
- 3. Calculate distributions of reserve forecasts
- 4. Calculate distributions, and correlations between, future payment streams
- 5. Price future underwriting years, including aggregate deductibles and excess layers
- 6. Easily update models and track forecasts as new data arrive
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4 Components of Interest in Probabilistic Trend Family
- 1. Development period trend
- 2. Accident period trend
- 3. Payment/calender year trend
- 4. Distribution of the data about the trends
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Assumptions of Extended Link Ratio Family Model
- 1. The standardized errors are normally distributed
- 2. E(y|x) = bx or the mean cumulative aj = cumulative j-1 times b
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