 Risk aggregation and stochastic claims reserving in disability insuranceBoualem Djehiche and Björn Löfdahl Insurance: Mathematics and Economics, 2014, vol. 59, issue C, 100-108 Abstract: We consider a large, homogeneous portfolio of life or disability annuity policies. The policies are assumed to be independent conditional on an external stochastic process representing the economic–demographic environment. Using a conditional law of large numbers, we establish the connection between claims reserving and risk aggregation for large portfolios. Further, we derive a partial differential equation for moments of present values. Moreover, we show how statistical multi-factor intensity models can be approximated by one-factor models, which allows for solving the PDEs very efficiently. Finally, we give a numerical example where moments of present values of disability annuities are computed using finite-difference methods and Monte Carlo simulations. Keywords: Disability insurance; Stochastic intensities; Conditional independence; Risk aggregation; Stochastic claims reserving; Mimicking (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:59:y:2014:i:c:p:100-108 DOI: 10.1016/j.insmatheco.2014.09.001 Access Statistics for this article Insurance: Mathematics and Economics is currently edited by R. Kaas, Hansjoerg Albrecher, M. J. Goovaerts and E. S. W. Shiu More articles in Insurance: Mathematics and Economics from Elsevier |
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