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Overview
Key Advantages
Screen Shots
Downloads
Overview
VACS-LRC is the software developed by VACS for calculating loss reserves
based on the observations of a run-off triangle.
The concept of fair value plays a dominant role in the recent approach of
IBNR evaluations. The IBNR reserves are considered as stochastic quantities,
which can only be fully characterized by their distribution functions. For
modeling the calendar year evolutions, use can be made of financial models such
as the Vasichec model, the CIR model, etc.
The problem of the combination of financial and purely actuarial uncertainty
is solved in a unique way by using the theory of comonotonicity. This theory
enables us to combine the model uncertainty with the (hard-to-measure)
dependency structure and the volatility effects of the financial models.
Key Advantages
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Our
approach starts from basic statistical knowledge (log-linear models).
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distribution of the IBNR reserves induced by the structure of the model
accepted and tested for modelizing the past as assumed in all available methods. Both
for the best estimate of the distribution as well as for the comonotone
distribution, the fair value as well as the supervisory value are obtained (e.g. percentiles of
99%). Hence the software is adapted to the modern accounting
standards.
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Our
approach provides very accurate estimates for the distribution function of
the IBNR reserve, because of the introduction of stochastic return models
for determining present values.
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| The comonotone structure in combination with the
discount process provides one with very realistic distributions. In case no
discounting process is introduced, recently the software was adapted to
provide best estimates for the distribution of IBNR reserves, avoiding the
time consuming and questionable simulation techniques or naive fitting of
lognormal distributions.
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The
program is written in JAVA, the language of software technology of the near
future, platform-independent and extremely useful for transportation over
the Internet.
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The
software VACS-LRC has been tested thoroughly by ASLK(Fortis); De
Vaderlandsche (ING), KBC,
Cobac N.V., AMMA.
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Screen Shots
Screen 1
You can build a model for the data using interactive
residual plots and identification models to identify trends. You can optimise
your model by a measure of Fit. The significance of the parameters and the model
hypothesis are tested. More detailed diagnostics are possible by outlier
analysis, sensitivity analysis and validation.
Screen 2
The lowerbound(ES) and the upperbound(CO) for the distribution for a sum of arbitrary
chosen cells in the triangle, discounted with a stochastic intrest, can be
determined (see screen3). The characteristics of this distribution can be asked for.
Screen 3
Downloads
An evaluation version as well as a manual of VacsLRC can be downloaded. It
enables you to test to software with three example triangles. Also, don't forget
to download the articles on this page!
Go to Download page
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