A Nonproportional Premium Rating Method for Construction Risks

Daniel Abramson

North American Actuarial Journal, 2022, vol. 26, issue 4, 626-645

Abstract: Correct pricing of nonproportional (primary or excess of loss) insurance for construction risks must consider not only how the insured property values build up over time, but also how the probable maximum loss (PML) changes. Conventional pricing methods for static property risks cannot be employed for construction risks, since the latter are characterized by PML patterns that change over time, as well as evolving loss exposures and perils arising from the various phases of the construction project. A further complication arises when delay in startup (DSU) is covered, because a DSU loss is triggered by a property damage loss and both losses contribute jointly to the erosion of an excess layer. This article describes a pricing method with analysis of specific cases of interest, including guidelines for creating practical excess of loss rating models.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10920277.2022.2036197 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:uaajxx:v:26:y:2022:i:4:p:626-645

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/uaaj20

DOI: 10.1080/10920277.2022.2036197

Access Statistics for this article

North American Actuarial Journal is currently edited by Kathryn Baker

More articles in North American Actuarial Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().