Transaction time modeling of Workers’ Compensation Insurance

Specialeforsvar: Isabella Krogh Nielsen

Titel: Transaction time modeling of Workers’ Compensation Insurance

Abstract: This thesis explores multistate transaction time modeling of workers’ compensation insurance reserving. More specifically, we discuss and develop a framework for estimating reported-but-notsettled reserves for loss of earning capacity claims in a Markovian multistate model. Initially, we review fundamental background information about workers’ compensation insurance, including the legal framework. This is succeeded by a stylized example of loss of earning capacity modeling, highlighting the main characteristics of the product as a starting point for further analyses. Next, we present the selected model class consisting of a pure jump process corresponding to the time at which the insured reports the claim. After giving an exposition on the topics of marked point processes, we relate the likelihood for our associated counting processes to the likelihood for independent Poisson distributed random variables. This relation yields an estimation procedure for the transition hazards based on standard methods and their software implementations, which is applied to actual data. Finally, the estimated model is applied to calculate reported-but-notsettled reserves for reported loss of earning capacity claims.

Vejleder: Christian Furrer
Censor:  Pernille Jul Overby