CAS Research to Explore Future Loss Under Inflationary Dynamics

In response to its 2025 request for proposals on forecasting future loss payments from policies sold in the past, the Casualty Actuarial Society (CAS) has selected the research project "Future Loss under Inflationary Dynamics" for development. The project is led by Peter Hieber, associate professor of actuarial science at the University of Lausanne, and Kemal Burak Baykal, research assistant at Marmara University.

Hieber and Baykal bring international experience to the topic of future loss payments, with exposure to differing inflationary environments in Switzerland and Turkey. Their academic backgrounds in statistics, financial mathematics, and life and pension insurance provide a multidisciplinary perspective on general insurance reserving.

The proposed research aims to develop interpretable yet advanced statistical frameworks to forecast the distribution of future loss payments for insurance policies. Traditional triangle-based reserving techniques datasets can be viewed as following longitudinal data structure, where claims are observed repeatedly over time by exposure group, accident year, and coverage type.

Framing reserving data in this way allows the problem to be approached using methodologies similar to those applied in other fields, such as agronomy and pharmacology. The project proposes a Bayesian hierarchical longitudinal model (primary framework) complemented by a state-space/dynamic linear model (validation framework). Together, these approaches aim to produce distributional forecasts of future losses while maintaining actuarial interpretability.

For more information on CAS research, visit casact.org/research.