An actuarial approach for modeling pandemic risk

Donatien Hainaut ()
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Donatien Hainaut: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2020025, LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: This article proposes a model for pandemic risk and two stochastic extensions. It is designed for actuarial valuation of insurance plans providing healthcare and death benefits. The core of our approach relies on a deterministic model that is an efficient alternative to the susceptible-Infected-Recovered (SIR) method. This model explains the evolution of the first waves of COVID-19 in Belgium, Germany, Italy and Spain. Furthermore, it is analytically tractable for fair pure premium calculation. In a first extension, we replace the time by a Gamma stochastic clock. This approach randomizes the timing of the epidemic peak. A second extension consists in adding a Brownian noise and a jump process to explain the erratic evolution of the population of confirmed cases. The jump component allows for local resurgences of the epidemic.

Keywords: SIR; epidemic risk; COVID-19; jump-diffusion (search for similar items in EconPapers)
Pages: 25
Date: 2020-01-01
New Economics Papers: this item is included in nep-hea and nep-rmg
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