A METHOD FOR CONSTRUCTING AND INTERPRETING SOME WEIGHTED PREMIUM PRINCIPLES

We present a method for constructing and interpreting weighted premium principles. The method is based on modifying the underlying risk distribution in such a way that the risk-adjusted expected value (or premium) is greater than the expected value of some conveniently chosen function of claims, whi...

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Bibliographic Details
Published in:ASTIN Bulletin : The Journal of the IAA 2020-09, Vol.50 (3), p.1037-1064
Main Authors: Castaño-Martínez, Antonia, López-Blazquez, Fernando, Pigueiras, Gema, Sordo, Miguel Á.
Format: Article
Language:English
Subjects:
Actuarial science
Expected values
Principles
Random variables
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Summary:We present a method for constructing and interpreting weighted premium principles. The method is based on modifying the underlying risk distribution in such a way that the risk-adjusted expected value (or premium) is greater than the expected value of some conveniently chosen function of claims, which defines the insurer’s perception of the risk. Under some assumptions on the function of claims, the method produces distortion premium principles. We provide several examples under different assumptions on the claim arrival process and different functions of claims, including record claims and kth record claims.
ISSN:0515-0361
1783-1350
DOI:10.1017/asb.2020.15