Claims reserving is central to the insurance industry. Insurance liabilities depend on a number of different risk factors which need to be predicted accurately. This prediction of risk factors and outstanding loss liabilities is the core for pricing insurance products, determining the profitability of an insurance company and for considering the financial strength (solvency) of the company.

Following several high-profile company insolvencies, regulatory requirements have moved towards a risk-adjusted basis which has lead to the Solvency II developments. The key focus in the new...