Stochastic Modeling of Reserve Uncertainty: Univariate and Bivariate Approaches in the Egyptian General Insurance Market | ||
| المجلة العلمية للدراسات والبحوث المالية والتجارية | ||
| Volume 6, Issue 2 - Serial Number 1, July 2025, Pages 871-894 PDF (1.38 M) | ||
| Document Type: المقالة الأصلية | ||
| DOI: 10.21608/cfdj.2025.389723.2279 | ||
| Authors | ||
| Shana Yousef* ; Mahmoud Elsayed; Dalia Khalil | ||
| Department of insurance and actuarial science, Cairo University | ||
| Abstract | ||
| This study focuses on estimating and comparing reserve risk uncertainty using two actuarial approaches: the univariate stochastic Mack model and the bivariate stochastic chain ladder model. The analysis is applied to three major lines of business; motor, medical, and fire in an Egyptian general insurance company by utilizing R-program during the period from 2015 to 2024. The stochastic Mack model is used independently on each line to assess the reserve estimate and its associated uncertainty. Then, a bivariate stochastic chain ladder model is employed incorporating two lines of business. This bivariate approach enables actuaries to capture the inherent dependencies across different lines, resulting in more accurate and robust reserve estimates. By joint modeling, a better understanding of reserve dynamics allowing for the quantification of diversification benefits is provided. The findings demonstrate that recognizing cross-line dependencies result in less uncertainty estimates of reserves, which could improve the predictive performance and provide a more realistic assessment of reserve risk. | ||
| Keywords | ||
| Reserve uncertainty; diversification effect; stochastic reserving; bivariate chain ladder; mean square error of prediction | ||
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