Abstract
Claim reserving primarily relies on macro-level models, with the Chain-Ladder method being the most widely adopted. These methods were heuristically developed without minimal statistical foundations, relying on oversimplified data assumptions and neglecting policyholder heterogeneity, often resulting in conservative reserve predictions. Micro-level reserving, utilizing stochastic modeling with granular information, can improve predictions but tends to involve less attractive and complex models for practitioners. This paper aims to strike a practical balance between aggregate and individual models by introducing a methodology that enables the Chain-Ladder method to incorporate individual information. We achieve this by proposing a novel framework, formulating the claim reserving problem within a population sampling context. We introduce a reserve estimator in a frequency and severity distribution-free manner that utilizes inverse probability weights (IPW) driven by individual information, akin to propensity scores. We demonstrate that the Chain-Ladder method emerges as a particular case of such an IPW estimator, thereby inheriting a statistically sound foundation based on population sampling theory that enables the use of granular information, and other extensions.
