ON MARINE LIABILITY PORTFOLIO MODELING

William Guevara-Alarcón, Hansjörg Albrecher and Parvez Chowdhury

ASTIN Bulletin, 2020, vol. 50, issue 1, 61-93

Abstract: Marine is the oldest type of insurance coverage. Nevertheless, unlike cargo and hull covers, marine liability is a rather young line of business with claims that can have very heavy and long tails. For reinsurers, the accumulation of losses from an event insured by various Protection and Indemnity clubs is an additional source for very large claims in the portfolio. In this paper, we first describe some recent developments of the marine liability market and then statistically analyze a data set of large losses for this line of business in a detailed manner both in terms of frequency and severity, including censoring techniques and tests for stationarity over time. We further formalize and examine an optimization problem that occurs for reinsurers participating in XL on XL coverages in this line of business and give illustrations of its solution.

Date: 2020
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