Non-life insurance cash flow model based on unaggregated data
It is now widely recognized that the key question for solvency measuring as well as insurance liability valuation is the determination of probability distribution of future cash flows of an insurance company. While the majority of the present popular models are based solely on unaggregated data (usually triangle schemes), our models are based directly on individual claims. We focus on the probabilistic description of the settlement process of an individual loss. This kind of modeling is necessary to incorporate properly some features such as policy limits or the reinsurer's share, or whenever models based on triangle schemes fail. The outcomes of the models are then cash flows for each loss in the portfolio which can be further aggregated on any level necessary. These models (either stochastic or deterministic) can be used for:
- liabilities valuation (best estimate),
- internal solvency modeling,
- ALM strategy optimization or
- reinsurance program optimization.
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