On finite-time ruin probabilities with reinsurance cycles influenced by large claims

Mathieu Bargès (), Stéphane Loisel and Xavier Venel
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Mathieu Bargès: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon, Ecole d'Actuariat - ULaval - Université Laval [Québec]

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Abstract: Market cycles play a great role in reinsurance. Cycle transitions are not independent from the claim arrival process : a large claim or a high number of claims may accelerate cycle transitions. To take this into account, a semi-Markovian risk model is proposed and analyzed. A refined Erlangization method is developed to compute the finite-time ruin probability of a reinsurance company. As this model needs the claim amounts to be Phase-type distributed, we explain how to fit mixtures of Erlang distributions to long-tailed distributions. Numerical applications and comparisons to results obtained from simulation methods are given. The impact of dependency between claim amounts and phase changes is studied.

Date: 2011
New Economics Papers: this item is included in nep-rmg and nep-upt
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Published in Scandinavian Actuarial Journal, 2011, pp.xxx-xxx

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00430178

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