Credibility Premium Estimation of Insurance Claims in Nigeria

In this paper one of the foundational theories in actuarial science-the Empirical Bayes credibility theory model 1 (Buhlmann model), is applied to estimate the pure risk premium based on the aggregate net claim data of 5 years (2009-2013). This involves estimating the credibility premium in the next year (2014). Five different classes of risk are considered from the insurance industry in Nigeria-fire, accident, motor, marine and, oil and gas insurance portfolios. Verification of the unbiasedness of the structural parameters of the credibility factor is presented. A chi-square goodness of fit test is carried out to compare the estimated values with the actual claim data. The result shows that there is no significant difference between the estimated values and the actual values for the year 2014.