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

DOI10.1080/03461238.2015.1017527zbMATH Open1401.91090arXiv1501.00833OpenAlexW2012139435MaRDI QIDQ4575381FDOQ4575381

Authors: Jonas Alm 

Publication date: 13 July 2018

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

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.

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

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zbMATH Keywords

Solvency IIrisk aggregationdependence modellingsolvency capital requirement

Mathematics Subject Classification ID

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

Cites Work

• An introduction to statistical modeling of extreme values
• Robust Tests for the Equality of Variances
• Risk aggregation with dependence uncertainty
• Modeling dependent risks with multivariate Erlang mixtures
• Title not available (Why is that?)
• Dependence modeling in non-life insurance using the Bernstein copula
• Modeling accounting year dependence in runoff triangles

Cited In (3)

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

Uses Software

• ismev

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