The Incurred Loss Process

Overview

Towards a theory of incurred loss processes, starting with a review of stochastic processes.

Probability background | Stochastic processes | General examples | Incurred loss processes

Introduction

Actuaries know how to model the loss payment process. However, to compute appropriate risk loads on multi-period risks they need a model of the incurred loss process—a problem largely unconsidered in the literature. In this series of posts, we consider such models. The first three sections are background information, laying out some properties and examples of stochastic processes. The fourth section applies the theory to create different ILP models.

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