Reinforcement Learning for Micro-Level Claims Reserving

Outstanding claim liabilities are revised repeatedly as claims develop, yet most modern reserving models are trained as one-shot predictors and typically learn only from settled claims. We formulate individual claims reserving as a claim-level Markov decision process in which an agent sequentially updates outstanding claim liability (OCL) estimates over development, using continuous actions and a reward design that balances accuracy with stable reserve revisions. A key advantage of this reinforcement learning (RL) approach is that it can learn from all observed claim trajectories, including claims that remain open at valuation, thereby avoiding the reduced sample size and selection effects inherent in supervised methods trained on ultimate outcomes only. We also introduce practical components needed for actuarial use -- initialisation of new claims, temporally consistent tuning via a rolling-settlement scheme, and an importance-weighting mechanism to mitigate portfolio-level underestimation driven by the rarity of large claims. On CAS and SPLICE synthetic general insurance datasets, the proposed Soft Actor-Critic implementation delivers competitive claim-level accuracy and strong aggregate OCL performance, particularly for the immature claim segments that drive most of the liability.

An Interpretable Deep Learning Model for General Insurance Pricing

This paper introduces the Actuarial Neural Additive Model, an inherently interpretable deep learning model for general insurance pricing that offers fully transparent and interpretable results while retaining the strong predictive power of neural networks. This model assigns a dedicated neural network (or subnetwork) to each individual covariate and pairwise interaction term to independently learn its impact on the modeled output while implementing various architectural constraints to allow for essential interpretability (e.g. sparsity) and practical requirements (e.g. smoothness, monotonicity) in insurance applications. The development of our model is grounded in a solid foundation, where we establish a concrete definition of interpretability within the insurance context, complemented by a rigorous mathematical framework. Comparisons in terms of prediction accuracy are made with traditional actuarial and state-of-the-art machine learning methods using both synthetic and real insurance datasets. The results show that the proposed model outperforms other methods in most cases while offering complete transparency in its internal logic, underscoring the strong interpretability and predictive capability.

Distributional Refinement Network: Distributional Forecasting via Deep Learning

A key task in actuarial modelling involves modelling the distributional properties of losses. Classic (distributional) regression approaches like Generalized Linear Models (GLMs; Nelder and Wedderburn, 1972) are commonly used, but challenges remain in developing models that can (i) allow covariates to flexibly impact different aspects of the conditional distribution, (ii) integrate developments in machine learning and AI to maximise the predictive power while considering (i), and, (iii) maintain a level of interpretability in the model to enhance trust in the model and its outputs, which is often compromised in efforts pursuing (i) and (ii). We tackle this problem by proposing a Distributional Refinement Network (DRN), which combines an inherently interpretable baseline model (such as GLMs) with a flexible neural network-a modified Deep Distribution Regression (DDR; Li et al., 2019) method. Inspired by the Combined Actuarial Neural Network (CANN; Schelldorfer and W{\''u}thrich, 2019), our approach flexibly refines the entire baseline distribution. As a result, the DRN captures varying effects of features across all quantiles, improving predictive performance while maintaining adequate interpretability. Using both synthetic and real-world data, we demonstrate the DRN's superior distributional forecasting capacity. The DRN has the potential to be a powerful distributional regression model in actuarial science and beyond.

Machine Learning with High-Cardinality Categorical Features in Actuarial Applications

High-cardinality categorical features are pervasive in actuarial data (e.g. occupation in commercial property insurance). Standard categorical encoding methods like one-hot encoding are inadequate in these settings. In this work, we present a novel _Generalised Linear Mixed Model Neural Network_ ("GLMMNet") approach to the modelling of high-cardinality categorical features. The GLMMNet integrates a generalised linear mixed model in a deep learning framework, offering the predictive power of neural networks and the transparency of random effects estimates, the latter of which cannot be obtained from the entity embedding models. Further, its flexibility to deal with any distribution in the exponential dispersion (ED) family makes it widely applicable to many actuarial contexts and beyond. We illustrate and compare the GLMMNet against existing approaches in a range of simulation experiments as well as in a real-life insurance case study. Notably, we find that the GLMMNet often outperforms or at least performs comparably with an entity embedded neural network, while providing the additional benefit of transparency, which is particularly valuable in practical applications. Importantly, while our model was motivated by actuarial applications, it can have wider applicability. The GLMMNet would suit any applications that involve high-cardinality categorical variables and where the response cannot be sufficiently modelled by a Gaussian distribution.