A METHOD FOR CONSTRUCTING AND INTERPRETING SOME WEIGHTED PREMIUM PRINCIPLES

Antonia Castaño-Martínez, Fernando López-Blazquez, Gema Pigueiras and Miguel Á. Sordo

ASTIN Bulletin, 2020, vol. 50, issue 3, 1037-1064

Abstract: We present a method for constructing and interpreting weighted premium principles. The method is based on modifying the underlying risk distribution in such a way that the risk-adjusted expected value (or premium) is greater than the expected value of some conveniently chosen function of claims, which defines the insurer’s perception of the risk. Under some assumptions on the function of claims, the method produces distortion premium principles. We provide several examples under different assumptions on the claim arrival process and different functions of claims, including record claims and kth record claims.

Date: 2020
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