Signs of dependence and heavy tails in non-life insurance data

DOI10.1080/03461238.2015.1017527MaRDI QIDQ4575381zbMATH OpenOpenAlexFDO

Authors Jonas Alm

Publication date 13 July 2018

Published in Scandinavian Actuarial Journal (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1501.00833

zbMATH Keywords

Solvency IIrisk aggregationdependence modellingsolvency capital requirement

Mathematics Subject Classification ID

Applications of statistics to actuarial sciences and financial mathematics (62P05)

Abstract: In this paper we study data from the yearly reports the four major Swedish non-life insurers have sent to the Swedish Financial Supervisory Authority (FSA). We aim at finding marginal distributions of, and dependence between, losses on the five largest lines of business (LoBs) in order to create models for Solvency Capital Requirement (SCR) calculation. We try to use data in an optimal way by sensibly defining an accounting year loss in terms of actuarial liability predictions, and by pooling observations from several companies when possible to decrease the uncertainty about the underlying distributions and their parameters. We find that dependence between LoBs is weaker in our data than what is assumed in the Solvency II standard formula. We also find dependence between companies that may affect financial stability, and must be taken into account when estimating loss distribution parameters. Moreover, we discuss under what circumstances an insurer is better (or worse) off using an internal model for SCR calculation instead of the standard formula.

Recommendations

• Risk aggregation in non-life insurance: standard models vs. internal models
• Solvency II: stability problems with the SCR aggregation formula
• Correlations between insurance lines of business: an illusion or a real phenomenon? Some methodological considerations
• Practical aspects of the aggregation of two risks in the Solvency II standard formula
• On some new dependence models derived from multivariate collective models in insurance applications

Cites work

• scientific article; zbMATH DE number 3153601 (Why is no real title available?)
• An introduction to statistical modeling of extreme values
• Dependence modeling in non-life insurance using the Bernstein copula
• Modeling accounting year dependence in runoff triangles
• Modeling dependent risks with multivariate Erlang mixtures
• Risk aggregation with dependence uncertainty
• Robust Tests for the Equality of Variances

Cited in

(3)

• Correlations between insurance lines of business: an illusion or a real phenomenon? Some methodological considerations
• Composite bias‐reduced Lp‐quantile‐based estimators of extreme quantiles and expectiles
• Dependence modelling in insurance via copulas with skewed generalised hyperbolic marginals

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Uses Software

• ismev

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