Modelling catastrophe claims with left-truncated severity distributions (extended version)

Chernobai, Anna and Burnecki, Krzysztof and Rachev, Svetlozar and Trueck, Stefan and Weron, Rafal (2005): Modelling catastrophe claims with left-truncated severity distributions (extended version).

Abstract

In this paper, we present a procedure for consistent estimation of the severity and frequency distributions based on incomplete insurance data and demonstrate that ignoring the thresholds leads to a serious underestimation of the ruin probabilities. The event frequency is modelled with a non-homogeneous Poisson process with a sinusoidal intensity rate function. The choice of an adequate loss distribution is conducted via the in-sample goodness-of-fit procedures and forecasting, using classical and robust methodologies.

This is an extended version of the article: Chernobai et al. (2006) Modelling catastrophe claims with left-truncated severity distributions, Computational Statistics 21(3-4): 537-555.

• Item Type: MPRA Paper
• Language: English
• Keywords: Natural Catastrophe, Property Insurance, Loss Distribution, Truncated Data, Ruin Probability
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C24 - Truncated and Censored Models ; Switching Regression Models ; Threshold Regression Models; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General

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