GENERALIZING THE LOG-MOYAL DISTRIBUTION AND REGRESSION MODELS FOR HEAVY-TAILED LOSS DATA

Zhengxiao Li, Jan Beirlant and Shengwang Meng

ASTIN Bulletin, 2021, vol. 51, issue 1, 57-99

Abstract: Catastrophic loss data are known to be heavy-tailed. Practitioners then need models that are able to capture both tail and modal parts of claim data. To this purpose, a new parametric family of loss distributions is proposed as a gamma mixture of the generalized log-Moyal distribution from Bhati and Ravi (2018), termed the generalized log-Moyal gamma (GLMGA) distribution. While the GLMGA distribution is a special case of the GB2 distribution, we show that this simpler model is effective in regression modeling of large and modal loss data. Regression modeling and applications to risk measurement are illustrated using a detailed analysis of a Chinese earthquake loss data set, comparing with the results of competing models from the literature. To this end, we discuss the probabilistic characteristics of the GLMGA and statistical estimation of the parameters through maximum likelihood. Further illustrations of the applicability of the new class of distributions are provided with the fire claim data set reported in Cummins et al. (1990) and a Norwegian fire losses data set discussed recently in Bhati and Ravi (2018).

Date: 2021
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