Comparative analysis of the techniques for estimating incurred but not reported (IBNR) reserves

Abstract

The rising incidence of insurance companies breaching regulations has heightened concerns about their stability and affected millions of customers through unpaid and delayed claims. Accurate estimation of Incurred But Not Reported (IBNR) reserves is essential for maintaining the financial health of insurance companies. This study aims to evaluate, compare, and rank various IBNR reserve estimation techniques to identify the most reliable methods, considering both regulatory requirements and market conditions. The research will employ a quasi-experimental design, focusing on general insurance companies operating in Kenya. Secondary data, spanning from 2013 to 2023, will be collected from reliable sources including IRA annual reports and insurance company websites. The study will also review industry reports and publications on reserving practices. The analysis will assess the performance of different IBNR reserving techniques, such as the Basic Chain Ladder, Bornhuetter-Ferguson, and Mack Model, to determine which methods provide the most accurate and reliable reserves. The findings will contribute to minimizing under-reserving and over-reserving, thereby enhancing insurers' solvency and profitability.