According to the newly developing International Accounting Standards, the evaluation of the
liabilities arising from the outstanding claims of a general insurance portfolio should contain a
market-based adjustment for risk, referred to as the market value margin. Sources of risk to be
taken into account in the assessment of the market value margin are the process risk, the
parameter risk and the model risk. The aim of this paper is to illustrate how the stochastic models
for the future payments, based on the framework of generalised linear models and quasi-likelihood
models can be used to evaluate these types of risk and, in particular, to reduce the model risk.
Following a classical approach in the statistical literature, the classes of models with variance
and link functions of the power family are considered. The comparison of models is performed
through the log-likelihood for models with distribution in the exponential dispersion family and
through the extended quasi-likelihood in the semi-parametric case in which only the first and
second moments of the response variables are specified. Numerical examples on real data
illustrate the methodology.
