Continuous-time modeling and bootstrap for chain ladder reserving (2406.03252v1)

Abstract: We revisit the famous Mack's model which gives an estimate for the mean square error of prediction of the chain ladder claims reserves. We introduce a stochastic differential equation driven by a Brownian motion to model accumulated total claims amount for the chain ladder method. Within this continuous-time framework, we propose a bootstrap technique for estimating the distribution of claims reserves. It turns out that our approach leads to inherently capturing asymmetry and non-negativity, eliminating the necessity for additional assumptions. We conclude with a case study and comparative analysis against alternative methodologies based on Mack's model.