Double Risk Catastrophe Reinsurance Premium Based on Houses Damaged and Deaths

The peaks over threshold (POT) model for catastrophe (CAT) reinsurance pricing has been widely used, but has mainly focused on univariate CAT reinsurance pricing. We provide further justification and support for the model by considering the addition of more than one type of CAT risk in the context o...

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Bibliographic Details
Published in:Mathematics (Basel) 2023-02, Vol.11 (4), p.810
Main Authors: Surya, Hilda Azkiyah, Napitupulu, Herlina, Sukono
Format: Article
Language:English
Subjects:
Approximation
Bankruptcy
catastrophe reinsurance
double-risk
Earthquake damage
Earthquakes
excess-of-loss reinsurance
Extreme value theory
Extreme values
Fatalities
Food science
Literature reviews
Monte Carlo simulation
Policyholders
Pricing
Reinsurance
Risk
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Summary:The peaks over threshold (POT) model for catastrophe (CAT) reinsurance pricing has been widely used, but has mainly focused on univariate CAT reinsurance pricing. We provide further justification and support for the model by considering the addition of more than one type of CAT risk in the context of extreme value theory. We further extend the applicability of the CAT reinsurance premium model by considering house damage and deaths as CAT risk. Using the proposed model, we present a simulation framework for pricing double risk CAT reinsurance, based on excess-of-loss reinsurance contract. Furthermore, we fit the POT model to the earthquake loss data in Indonesia. Finally, we provide the price of the double risk CAT reinsurance premium under the standard deviation premium principle. The framework results obtained show that the pricing formulas in this study are appropriate for the double risk claim and may be used as a basis for the pricing of double risk CAT excess-of-loss reinsurance contracts.
ISSN:2227-7390
2227-7390
DOI:10.3390/math11040810