Abstract
This study presents an easy-to-handle approach to measuring the severity of reinsurance that faces a system of dependent claims, where the reinsurance contracts are of excess loss or proportional loss. The proposed approach is a natural generalization of common reinsurance methodologies providing a conservative framework that deals with the fundamental question of how much money should a government hold to prepare for natural or human-made extreme risk events that the government will cover? Although the ruin theory is commonly used for extreme risk events, we suggest a new risk measure to deal with such events in a new framework based on multivariate risk measures. We analyze the results for the log-elliptical model of dependent claims, which are commonly used in risk analysis, and illustrate our novel risk measure using a Monte Carlo simulation.
Original language | American English |
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Article number | 50 |
Journal | Risks |
Volume | 11 |
Issue number | 3 |
DOIs | |
State | Published - 1 Mar 2023 |
Keywords
- catastrophic events
- financial simulation
- loss retention
- reinsurance claim
- reinsurance policy
- risk management
All Science Journal Classification (ASJC) codes
- Accounting
- Economics, Econometrics and Finance (miscellaneous)
- Strategy and Management