Panjer claim-count class ($p_n=(a+b/n)p_{n-1}$)

The nonnegative integer laws whose probabilities satisfy this recurrence for all $n\ge 1$. Their probability generating function solves $(1-az)G^{\prime }(z)=(a+b)G(z)$. This is the $(a,b,0)$ count class used in the Panjer aggregate algorithm; the count recurrence itself should be distinguished from that aggregate recursion. It includes the Poisson distribution, binomial distribution, and negative binomial distribution with suitable parameters.

For positive integer severities with probability mass function $f_j$ and independent count in the Panjer claim-count class, the aggregate probability mass function starts at $g_0=p_0$ and satisfies the displayed recurrence. If $P,F,G$ are the count, severity and aggregate probability generating functions, respectively, then $G=P\circ F$ and $(1-aF)G^{\prime }=(a+b)F^{\prime }G$. Equating the coefficient of $z^{r-1}$ gives $r{g}_r={\sum }_{j=1}^r[a(r-j)+(a+b)j]f_j{g}_{r-j}$. The positivity assumption excludes zero severities; otherwise the initial value and recursion denominator change.

For a claim count distribution in the Panjer claim-count class and independent nonnegative integer severities with mass $f_j$, the probability generating function composition is $G_S=G_N\circ G_X$. Combining it with $(1-az)G_N^{\prime }=(a+b)G_N$ gives $(1-a{G}_X)G_S^{\prime }=(a+b)G_S{G}_X^{\prime }$. Equating coefficients yields the displayed recursion. Zero severities change both the initial mass and the denominator. For nondegenerate proper Panjer count laws $a<1$, so the denominator is positive. An identically zero count is handled directly if its redundant parameter choice makes the denominator vanish.