An Actuarial Approach for Modeling Pandemic Risk

Donatien Hainaut ()
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Donatien Hainaut: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2021002, LIDAM Reprints ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: This article proposes a model for pandemic risk and two stochastic extensions. It 1 is designed for actuarial valuation of insurance plans providing healthcare and death benefits. 2 The core of our approach relies on a deterministic model that is an efficient alternative to the 3 susceptible-Infected-Recovered (SIR) method. This model explains the evolution of the first waves 4 of COVID-19 in Belgium, Germany, Italy and Spain. Furthermore, it is analytically tractable for fair 5 pure premium calculation. In a first extension, we replace the time by a gamma stochastic clock. 6 This approach randomizes the timing of the epidemic peak. A second extension consists in adding a 7 Brownian noise and a jump process to explain the erratic evolution of the population of confirmed 8 cases. The jump component allows for local resurgences of the epidemic.

Keywords: SIR; epidemic risk; COVID-19; jump-diffusion (search for similar items in EconPapers)
Date: 2021-01-01
Note: In: Risks - Vol. 9, no.1 (2021)
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvar:2021002

DOI: 10.3390/risks9010003

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