Mack (2000) - BF and GB methods

Question 1

Advantage of the CL method over the BF method

Answer 1

different actuaries obtain similar results

Question 2

Benktander method (aka iterated BF)

Answer 2

credibility weighting between CL and BF methods with credibility Z = % emerged

Question 3

Weights that will convert Benktander method into a credibility weighting between CL and a priori estimate

Answer 3

Z = 1 - ( 1 - % emerged) ^2

Question 4

Esa Hovinen reserve

Answer 4

proved ability to credibility weight reserves instead of ultimates, with Z = % emerged, Esa Hovinen reserve = GB reserve

Question 5

Reasons the Benktander method is superior to CL and BF (4)

Answer 5

1. produces a lower MSE as long as Z > % emerged / 2
2. better approx. of exact Bayesian procedure
3. Superior to CL since it gives more weight to a priori expectation
4. Superior to BF since it gives more weight to actual loss experience