The Benktander Golden Stairs and Other Parameter-Free Credibility Methods in Loss Reserving

Why use a Chain Ladder when you have Golden Stairs? The Benktander method has been Professor Walther Neuhaus’ loss reserving method of choice for more than three decades, due to its simplicity and efficiency. To him, it's the Benktander Golden Stairs. This talk gives a mathematical formulation of the notion that the Benktander method is not too far from optimal, most of the time. It does not claim that the Benktander method is optimal, only that it often is close; in most situations it outperforms the Chain Ladder method with a good margin. The criterion used to compare methods is “weighted average relative efficiency”. The results dispel the idea that iterating the Bornhuetter-Ferguson method more than once leads to a significant improvement in prediction accuracy.