Header

UZH-Logo

Maintenance Infos

One-Year Change Methodologies for Fixed-Sum Insurance Contracts


Dacorogna, Michel; Ferriero, Alessandro; Krief, David (2018). One-Year Change Methodologies for Fixed-Sum Insurance Contracts. Risks, 6(3):75.

Abstract

We study the dynamics of the one-year change in P&C insurance reserves estimation by analyzing the process that leads to the ultimate risk in the case of “fixed-sum” insurance contracts. The random variable ultimately is supposed to follow a binomial distribution. We compute explicitly various quantities of interest, in particular the Solvency Capital Requirement for one year change and the Risk Margin, using the characteristics of the underlying model. We then compare them with the same figures calculated with existing risk estimation methods. In particular, our study shows that standard methods (Merz–Wüthrich) can lead to materially incorrect results if the assumptions are not fulfilled. This is due to a multiplicative error assumption behind the standard methods, whereas our example has an additive error propagation as often happens in practice.

Abstract

We study the dynamics of the one-year change in P&C insurance reserves estimation by analyzing the process that leads to the ultimate risk in the case of “fixed-sum” insurance contracts. The random variable ultimately is supposed to follow a binomial distribution. We compute explicitly various quantities of interest, in particular the Solvency Capital Requirement for one year change and the Risk Margin, using the characteristics of the underlying model. We then compare them with the same figures calculated with existing risk estimation methods. In particular, our study shows that standard methods (Merz–Wüthrich) can lead to materially incorrect results if the assumptions are not fulfilled. This is due to a multiplicative error assumption behind the standard methods, whereas our example has an additive error propagation as often happens in practice.

Statistics

Citations

Dimensions.ai Metrics
1 citation in Web of Science®
2 citations in Scopus®
Google Scholar™

Altmetrics

Downloads

37 downloads since deposited on 27 Mar 2019
16 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Accounting
Social Sciences & Humanities > Economics, Econometrics and Finance (miscellaneous)
Social Sciences & Humanities > Strategy and Management
Language:English
Date:September 2018
Deposited On:27 Mar 2019 12:58
Last Modified:22 Jul 2021 09:08
Publisher:MDPI Publishing
ISSN:2227-9091
OA Status:Gold
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.3390/risks6030075
Other Identification Number:merlin-id:17160

Download

Gold Open Access

Download PDF  'One-Year Change Methodologies for Fixed-Sum Insurance Contracts'.
Preview
Content: Published Version
Filetype: PDF
Size: 1MB
View at publisher
Licence: Creative Commons: Attribution 4.0 International (CC BY 4.0)