On the consistency of credibility premiums regarding Esscher principle

Maolin Pan, Rongming Wang and Xianyi Wu ()

Insurance: Mathematics and Economics, 2008, vol. 42, issue 1, 119-126

Abstract: In this paper, we investigate the problems of convergence of experience-based ratemakings regarding the Esscher principle. In addition to the Bayes and the classical credibility premiums, we suggest a new credibility formula for the Esscher premium. Then we show the convergence of the Bayes and the newly defined credibility premiums towards the individual premium and point out that the classical credibility premium does not generally converge to the individual premium by presenting a sufficient and necessary condition under which the classical credibility Esscher premium converges to the individual premium. A simulation study is carried out to illustrate the theoretical conclusions.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:42:y:2008:i:1:p:119-126

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