"Pragmatic Stochastic Reserving" Working Party

The General Insurance Reserving Oversight Committee (GI ROC)  is planning to launch a new member-led working party. This will be the  "Pragmatic Stochastic Reserving" working party. 

The aims of this working party will be to: 

1. Research the stochastic reserving methods available to general insurance reserving actuaries, and to agree upon a diverse selection of stochastic reserving techniques which will form the focus of the working party's subsequent efforts.
2. Develop user-friendly explanations of the operational mechanics of each method.
3. Identify the key explicit and implicit assumptions underlying each method.
4. Assess the extent to which the underlying assumptions in each case are an adequate reflection of the real-world insurance environment, and the implications of any of the assumptions not reflecting reality.
5. Identify and summarise the practical situations in which each method might be relied upon to give reasonable results, and the circumstances in which each method might potentially break down.
6. Determine how each method should be used in a variety of commonplace practical situations, eg where there have been known disturbances in the patterns of claim development, individual large claims, etc.
7. Recommend how results might be selected from the outputs of different methods, how different methods might be preferred for different accident/underwriting years, how expert judgement might be applied throughout the process, and how methods and results might be effectively communicated to non-actuarial stakeholders.
8. Document the working party’s findings and conclusions (including any recommendations for focus on further methods by subsequent iterations of the working party). 

In considering the above, the Working Party should distinguish between the twin objectives of any stochastic reserving method, namely: (a) to produce a reasonable best estimate of reserves; and (b) to produce a reasonable estimate of the reserve variability.  Further, in the context of (b) above, the Working Party should consider the reliability of each method at different points of the reserve distribution.

Time Commitment:   Volunteers will typically be expected to attend between 8 – 12 meetings per annum and to perform research between meetings.  Meetings are held in London, often Staple Inn, and usually last for 2 hours.  Please note that there is flexibility regarding your attendance at meetings and members can attend by conference call as necessary. 

The goal is to assist in a workshop presentation at the 2014 GIRO conference.  Thereafter there will be an option, but no obligation, to remain on the working party to assist in delivering further work. 

How to get involved:   If you would like to offer your support and volunteer to be considered for this working party, please contact Debbie Atkins, Head of Volunteer Engagement.  When contacting Debbie please provide brief details of your relevant experience and an indication of your reasons for wishing to be involved.  A note of your ARN would also be helpful.