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Multivariate credibility for aggregate loss models. (English) Zbl 1084.62110

Summary: This paper develops credibility predictors of aggregate losses using a longitudinal data framework. For a model of aggregate losses, the interest is in predicting both the claims number process as well as the claims amount process. In a longitudinal data framework, one encounters data from a cross-section of risk classes with a history of insurance claims available for each risk class. Further, explanatory variables for each risk class over time are available to help explain and predict both the claims number and claims amount process.
For the marginal claims distributions, this paper uses generalized linear models, an extension of linear regression, to describe cross-sectional characteristics. Elliptical copulas are used to model the dependencies over time, extending prior work that used multivariate t-copulas. The claims number process is represented using a Poisson regression model that is conditioned on a sequence of latent variables. These latent variables drive the serial dependencies among claims numbers; their joint distribution is represented using an elliptical copula. In this way, the paper provides a unified treatment of both the continuous claims amount and discrete claims number processes.
The paper presents an illustrative example of Massachusetts automobile claims. Estimates of the latent claims process parameters are derived and simulated predictions are provided.

MSC:

62P05 Applications of statistics to actuarial sciences and financial mathematics
62J12 Generalized linear models (logistic models)
91B30 Risk theory, insurance (MSC2010)
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