23.1 Introduction

This was first touched on in ERA 1.3 when discussing the components of underwriting risk

Parameter risk is the risk inherent in selecting the wrong loss distribution

• Key for large companies since process risk is reduced with a large book

Projection risk can be modeled using time series

We can also measure estimation risk in parameter selection for a distribution

Model risk is the uncertainty about the distribution of the parameters themselves

Paper has 2 recommendations when using projection models