Before revision: Insurers record detailed information related to claims (e.g. the cause of the claim) and policies (e.g. the value of the insured risk) for pricing insurance contracts. However, this information is largely neglected when estimating the reserve for future liabilities originating from past exposures.We present a flexible, yet highly interpretable framework for including these claimand policy-specific covariates in a reserving model. Our framework focuses on three building blocks in the development process of a claim: the time to settlement, the number of payments and the size of each payment.
After revision: Insurers record detailed information related to claims (e.g. the cause of the claim) and policies (e.g. the value of the insured risk) , claim cause (e.g. hail) as well as the detailed claim's history (e.g. settlement, payment, involvement lawyer). We present the hierarchical reserving model as a modular framework for integrating a claim's history and claim-specific covariates into the development process of a claim: the time to settlement, the number of payments and the size of each payment.