ON HETEROGENEITY IN THE INDIVIDUAL MODEL WITH BOTH DEPENDENT CLAIM OCCURRENCES AND SEVERITIES

Yiying Zhang, Xiaohu Li and Ka Chun Cheung

ASTIN Bulletin, 2018, vol. 48, issue 2, 817-839

Abstract: It is a common belief for actuaries that the heterogeneity of claim severities in a given insurance portfolio tends to increase its dangerousness, which results in requiring more capital for covering claims. This paper aims to investigate the effects of orderings and heterogeneity among scale parameters on the aggregate claim amount when both claim occurrence probabilities and claim severities are dependent. Under the assumption that the claim occurrence probabilities are left tail weakly stochastic arrangement increasing, the actuaries' belief is examined from two directions, i.e., claim severities are comonotonic or right tail weakly stochastic arrangement increasing. Numerical examples are provided to validate these theoretical findings. An application in assets allocation is addressed as well.

Date: 2018
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